And now for some good news: The American job market is improving. According to the US Bureau of Labor Statistics, monthly job openings improved in July. This metric, of course, is a major gauge of the health of the US economy. More specifically, employers posted 5.9 million job openings in July. This is an improvement at a rate of 3.9 percent, as described by the Job Openings and Labor Turnover Summary (JOLTS) report. This compares to the 5.62 million job openings posted in June.
And what’s more, the private sector—and professional and business services in particular—posted more job openings than the public sector.
Now, if only things could remain that simple.
JOLTS is one of the few job market metrics monitored by the Federal Reserve Chair Janet Yellen. The report was published ahead of the U.S. central bank’s Sept. 20-21 policy meeting, during which the Fed is generally expected to keep interest rates where they are.
As such, a closer look at the numbers will indicate that while the job rate may be improving, the fact that they are in the private sector means that they require a specific skill set—and the job openings remain because there are not as many job-seekers with the appropriate skills as there are openings.
MUFG Union bank chief economist Chris Rupkey notes, “There are millions of jobs going begging right now in what has got to be one of the biggest mismatches between skills and lack of qualified help available in the nation’s history. The economy seems strong enough to weather a rate hike.”
In addition, while there were still about 1.6 million layoffs in July, the rate is mostly unchanged; and more importantly, the ratio of job openings to unemployment has reached its highest rating in 15 years.
Accordingly, RDQ Economics chief economist John Ryding comments, “This suggest wages should be pressured higher and, therefore, either price increases will pick up or profit margins will be squeezed further.”
In conclusion you must note that while labor market conditions appear to be improving, wage growth has only creeped forward at an agonizing pace. For example, the average hourly earnings rate has not held higher than 2.5 percent YOY. Economists now also report that we need a wage growth rate of at least three percent to get inflation anywhere near the Fed’s target.