A Closer Look into the U.S. Job Market

October 09, 2014 | Mike Spychalski, CAIA, Vice President

On October 7th, the Bureau of Labor Statistics released the August Job Openings and Labor Turnover Survey (JOLTS), which showed that the number of job openings waiting to be filled in the United States rose to 4.84 million. The 4.84 million vacant jobs in August is the highest number of job openings in the U.S. since January 2001, and is the third highest number of job openings on record since the inception of the JOLTS survey in 2000. The number of open jobs in the U.S. grew by 910,000 for the 12 month period ending August 31, which is the largest year-over-year increase in job openings since the JOLTS survey began. The large and growing number of open jobs in the U.S. indicates that the strong employment growth experienced recently is likely to continue into 2015.

The fact that there are a near-record number of vacant jobs in the U.S. while the unemployment rate is above the long-term average is a sign that employers are having difficulty finding qualified candidates for open positions. However, if this trend continues it will eventually start to put upward pressure on wages, which could be a bit of a double-edged sword. Higher wages would be a positive development for the overall economy, as the low level of wage growth the past several years has been a significant drag on consumer spending, which is the single largest contributor to GDP in the U.S. However, increased wage growth has the potential to put upward pressure on the inflation rate, which would likely force the Fed to raise interest rates more rapidly than the market currently anticipates, and this has the potential be a drag on the equity markets.