In a fascinating article in the New York Times earlier this week entitled “There’s Good News and There’s Bad News,” two macro economists articulated their polar opposite perspectives on the state of the American economy. In the article, Stephanie Pomboy’s rather bleak, glass-totally-empty outlook on the economy stems from her conviction that the current low growth environment is the result of a weak consumer, still battered from the Great Recession, who is now being further pummeled by rising healthcare costs. She further states, rather emphatically, that her “economic forecast in no way justifies another raise in rates,” and that, “we would be lucky to see job growth of more than 100,000 per month going forward.”
For her sake, I hope MacroMavens has closed early for Labor Day weekend and that no one is in the office tomorrow morning when the Bureau of of Labor Statistics releases its Employment Situation Report for August. Not only will tomorrow’s jobs report come in well above consensus estimates, but our data suggests that labor demand in an already strong labor market is growing and that robust job gains should continue through at least September and into Q4.
To be certain, forecasting job gains in a Full Employment environment presents a unique set of challenges, particularly when labor force participation is so low. (As an aside, we’ve argued since at least April/May that the U.S. has, without question, been in a Full Employment environment). And yet despite those challenges, we are forecasting a net gain of 220,000 jobs in August based on LinkUp’s new and total job openings over the past few months.
What is really interesting about our data over the past 3 months is that while new job openings have risen by an average of 5% month over month, total job openings have declined by 5%. To some extent, this has been the trend throughout 2016, with month-over-month growth in new job openings on LinkUp averaging 1% while month-over-month growth in total job openings has averaged -2%. As comparison, those numbers were 4.6% and 3.1% respectively in 2015 and 3.4% and 3.5% in 2014. So unlike the two previous years, what is happening so far in 2016, and especially in the past 3 months, is that companies are posting more and more new job openings while at the same time, decreasing total job openings, presumably because they are filling those positions with new hires.
Granted, the average growth rate of new job openings this year is less than last year, not surprising given that 13.5 million jobs have been added to the U.S. economy since October of 2010. So while the volume of hiring may be down slightly from last year, that divergence between new and total job openings suggests that the pace of hiring is accelerating, job churn is increasing, and labor demand remains robust. And indeed, additional data from LinkUp confirms the phenomena.
Job Duration, or the number of days that job openings are active on an employer’s corporate career portal, has dropped from 56 days in February to 47 days in August, indicating that jobs are getting filled faster than they were 6 months ago.
That acceleration in velocity of hiring is driven by the significant growth in the number of jobs that are being filled in less than 15 days. The chart below includes, for each month, the number of job openings that have rolled off of LinkUp’s search engine in the previous 6 months, presumably because they were filled with a hire (a pretty safe assumption). Since April, not only has the number of ‘Filled Jobs’ during the previous 6 months increased from 2.6 million to 3.6 million, but the number of those jobs that were filled in less than 15 days has risen from 888,000 in March to 1.36 million in August, an increase of 53%.
As the chart below indicates, as hiring velocity accelerates, job duration declines and the number of jobs getting filled increases.
So based on all of our data, we are forecasting a net gain of 220,000 jobs in August, above the consensus estimate of 180,000 jobs in Bloomberg’s monthly NFP survey of economists.
And as stated previously, not only will tomorrow’s jobs number surprise to the upside, we see continued strength in monthly job gains into the fall. In August, new job listings on LinkUp rose 6% and total job listings rose 4%. Even more encouraging is the fact that gains were seen essentially across the entire country.
Those gains in new and total job openings point to sustained momentum in the labor market into the Fall. So leaving aside for the time being whether or not the Fed will raise rates in September (they will), it will undoubtedly become clear over the next few jobs reports that the New York Times article should have been titled:
“There’s Good News and There’s More Good News.”