The labour market is rolling.
On Tuesday, the National Federation of Independent Business, a conservative lobby group, released its latest small business report, which showed that its small business optimism index rose to 98.3 in May.
But the really positive part of the report isn’t the headline reading — though this did rise to a 5-month high — but the incredibly bullish commentary on the labour market.
In its report, the NFIB said:
Owners report that the labour market is, from an historical perspective, getting very tight. Owner complaints about “finding qualified workers” are rising, job openings are near 42 year record high levels, and job creation plans remain solid. Over 80 per cent of those hiring or trying to hire in May reported few nor no qualified applicants. This is inconsistent with current Fed policy, which has no impact on the supply of qualified workers.
Read that again. 80% of small businesses trying to hire workers reported few or no qualified applicants. When you’ve got a soft labour market, employers are able to find qualified candidates because there are more workers available than positions open.
But when this dynamic changes, workers get to have their pick of jobs while employers are stuck searching for candidates that meet their qualifications.
Last Friday, we learned that in May the US economy added 280,000 jobs, while the unemployment rate ticked up slightly as more people came back into the labour force.
The report also showed that wages finally appear to be picking up with average hourly earnings rising 2.3% over the prior year in May, the largest increase since October 2009 when this measure was already on the way down to recession lows.
Throughout 2015 we’ve seen announcements from companies like Wal-Mart, Target, and McDonald’s that they would raise wages, and just on Monday, Chipotle announced that it would begin offering paid time off for hourly employees.
And so the signs are everywhere that the labour market is starting to “tighten,” which is economics-speak for the balance of power shifting from employers to employees.
On Tuesday, we’ll get the latest JOLTs report from the BLS, which shows how many job openings there were in the economy in April, as well as how many people quit and left jobs during the month.
But the signs are everywhere: the labour market is strong and getting stronger.