Has Labor Had Its Day? Job Openings Spike, Workers Dwindle

Job openings hit record high in April…
Small business optimism falls amid labor shortage…
Deutsche Bank sounds the alarm on inflation…

Job openings hit a record high in April as employers struggle amid a severe labor shortage in the U.S. economy.

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) shows there were 9.3 million available jobs at the end of the month.

The accommodation and food services industry saw the largest gain in openings with an increase of 349,000 as that sector of the economy continues to reopen.

But even as the number of available jobs surged to a new all-time high, hiring was little changed.

The number of hires in April was little changed at 6.1 million with the hiring rate unchanged at 4.2%.

Businesses in accommodation and food services also led hiring for the month, adding 232,000 employees.

That left that industry with a net deficit of 117,000 workers for the month of April.

Despite the record number of available jobs in the month, total separations — which includes quits, layoffs and discharges, and other separations — rose by 324,000 to 5.8 million.

Retail trade saw the largest number of separations at 116,000.

The quits rate, which is often used “as a measure of workers’ willingness or ability to leave jobs” jumped to a record high 2.7%.

The number of layoffs and discharges was little changed for the month at 1.4 million.

The annual net change in employment for April showed a gain of 11.3 million workers as hires totaled 75.4 million and separations totaled 64.0 million year-over-year.

The data is evidence of a trend small business owners are raising concerns about as they reopen and search for workers.

Small Business Owners Sound the Alarm On Labor Shortage

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The National Federation of Independent Business (NFIB) Small Business Optimism Index slipped for the first time in four months in May to 99.6.

That was down 0.2 points from April as business owners feel the pressure from the lack of qualified workers to fill their open positions.

A record-high 48% of owners said they had openings they could not fill last month.

61% of owners who responded to the survey said they were hiring or attempting to hire in May and 93% of those said they had few or no qualified applicants for those positions.

A seasonally-adjusted net 34% of owners said they raised compensation in May — the highest level in the past 12 months — while a net 22% plan to in the next three months.

NFIB Chief Economist Bill Dunkelberg said, “Small business owners are struggling at record levels trying to get workers back in open positions. Owners are offering higher wages to try to remedy the labor shortage problem. Ultimately, higher labor costs are being passed on to customers in higher selling prices.”

But those higher wages are causing more concern about inflation in an economy that’s already seeing inflation run hot.

A net 40% of owners who responded to the NFIB survey said they had raised average selling prices in May while a record 43% plan to do so in the next three months.

Wholesale, retail, and manufacturing businesses reported the most frequent price hikes.

Labor Shortage Intensifies Inflation Discussion

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Price hikes among small businesses come as the Federal Reserve continues to insist the current inflationary pressures in the economy will be temporary.

But one of the largest financial groups in the world disagrees with that assessment.

Economists at Deutsche Bank issued a dire warning this week about the inflationary trend in the U.S.

In a statement, the group argued the surge of government spending in the U.S. and dovish policy from the Fed could combine to create inflationary conditions similar to the 1940s and 1970s.

They also highlighted elevated savings rates amid the pandemic, saying the $2 trillion in excess savings amassed over the last year will make things worse.

“Consumers will surely spend at least some of their savings as economies reopen. This raises the very real specter of consumer-driven inflation.”

The economists also spoke out against the shift in economic policy to focus more on social goals, saying the choice to downplay inflation ultimately undermines those goals.

“Despite the shift in priorities, central bankers must still prioritise inflation. Indeed, history has shown that the social costs of significantly higher inflation and greatly expanded debt servicing obligations make it hard, if not impossible, to reach the social goals that the new US administration (among others) is keen to achieve. We fear that the vulnerable and disadvantaged will be hit first and hardest by mistakes in policy.”

They also pushed back against Fed Chair Jerome Powell’s claims that the current inflation pressures are temporary.

“A lack of preparation for the return of inflation is concerning. Even if some inflation today is transitory, it may feed into expectations as in the 1970s. Even if only embedded for a few months, these expectations may be difficult to contain with stimulus so great.”

But officials in the U.S., including Treasury Secretary Janet Yellen, have attempted to paint the rising inflation pressures as a good thing for the U.S. economy.

It remains to be seen who will be right about inflation in the end but Deutsche Bank says things are different now than ever before.

“Fiscal injections are now “off the charts” at the same time as the Fed’s modus operandi has shifted to tolerate higher inflation. Never before have we seen such coordinated expansionary fiscal and monetary policy. This will continue as output moves above potential. This is why this time is different for inflation.”