After closing for a minuscule gain on Friday, stocks traded flat again this morning despite a blockbuster July jobs report. The data (revealed last week) showed that 943,000 jobs were added last month vs. 845,000 expected. The unemployment rate sunk to 5.4%, beating the estimate of 5.7% with ease.
But the June Job Openings and Labor Turnover Survey (JOLTS), released shortly after the market opened today, painted an entirely different employment picture.
Economists expected a print of 9.27 million job openings through June. Instead, the JOLTS delivered an eye-popping 10.07 million job opening figure, blowing away the consensus estimate. Each month over the last six months has seen a rise in job openings.
June’s gain, however, officially put JOLTS into seven figures.
Perhaps the most stunning “miss” was the number of job openings vs. unemployed workers, which can provide a good overview of how cold or overheated the US labor market truly is. Again, economists expected 500,000 more job openings than unemployed workers. The JOLTS report showed that there were 1.37 million more job openings compared to the total number of unemployed people as of July (8.7 million).
Unsurprisingly, this was one of the largest gulfs between job openings and the unemployed ever measured. What’s more, this gap has only widened despite a decline in unemployed workers.
And this isn’t necessarily a hiring problem, either. The Bureau of Labor Statistics reported in June that hiring rose by 697,000 to a total of 6.72 million, marking the third-highest level on record. Total quits, meanwhile, rose 2.7%.
This may be due “in part to increased opportunities for workers to find better job matches, potentially with higher wages or safer working conditions in the lingering pandemic,” according to Elise Gould, senior economist at the Economic Policy Institute.
This is perhaps best represented by the available-worker-to-job-opening ratio, which fell to 0.9 in June. That’s the first reading below 1 since the start of the pandemic. It signals a greater demand for workers than jobs, confirming that a labor shortage (now from a statistical point of view) has most certainly taken hold.
“If we want to sustain our economic recovery, we have to get serious about removing barriers to filling these open jobs,” explained Neil Bradley, executive vice president and chief policy officer of the US Chamber of Commerce.
“That includes addressing childcare needs, rightsizing unemployment programs, skills training, and increasing legal immigration.”
Bradley certainly has his work cut out for him. In general, though, the June JOLTS report suggests that the unemployment rate should continue to fall dramatically, just as it did in July, as unemployment benefits progressively decrease. An even better August jobs report is seeming more and more like a possibility.
Translation: the Fed will, in all likelihood, issue that “taper warning” in September that Wall Street predicted last Friday following the major July jobs “beat.”
That should only suck more bullish enthusiasm out of the market as traders buckle down for a period of less-dovish monetary policy.
However, it won’t really be all that hawkish relative to the last 18 months, in which Fed Chairman Jerome Powell took the most dovish stance on record. So, though it may seem like the sky will be falling, the bull market won’t necessarily be finished come October 1st.
A correction could certainly follow a taper warning from the Fed, but in the end, it should ultimately generate yet another fantastic buying opportunity for pennywise traders.
