As part of a comprehensive overview of the US labour market, the Bureau of Labour Statistics (BLS) compiles the Job Openings and Labour Turnover Summary (JOLTS). The latest May figure for job openings is 11.6mn, to be considered with the significantly low unemployment rate of 3.6% and employment returning to its pre-pandemic peak

The other employment metric comes from the National Federation of Independent Business (NFIB), which represents small businesses active in retail, services and construction. In their latest monthly survey on small businesses, participants identified the ‘quality of labour’ as their most important current problem. This is a long-standing trend that has seemingly refused to ease.

Historically, small business sentiment on quality of labour has tracked the change in job openings. When there are fewer openings, the labour market becomes more competitive. Recently, concern over labour quality has stopped tracking job openings. The respondents to the NFIB questionnaire have reported growing worries over inflation and the cost of labour (wages).

Small businesses are still intent on adding to their workforce, with roughly 50% of owners reporting being unable to fill positions. Such a tight labour market and the large number of job openings amounts to approximately 2 available jobs per jobseeker, which will boost workers’ bargaining power and put a floor under wages and perhaps inflation.

The US economy is operating close to capacity, as evidenced by low unemployment and excess demand in the labour market. A large number of job openings mean that the labour market has a buffer to withstand the Fed’s rate hikes; there is scope for the market to withstand considerable cooling, decreasing the number of job openings without significant layoffs. The risk is wage-driven inflation negating the Fed’s interest policy unless demand cools down.

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