INDICATOR: October Job Openings and Labor Turnover Survey (JOLTS)
KEY DATA: Openings: up 1.1%; Hires: down 2.7%; Separations: Down 5.1%
IN A NUTSHELL: "Growing job openings point to better hiring in the future and that adds to the belief that the labor market is turning the corner."
WHAT IT MEANS: When we get the monthly job numbers, we only see the difference between the number of people that firms hire and the number of people that leave positions for whatever reason. The JOLTS data provide us with more of the details of those changes, which run in the millions. For example, there were over 4.5 million people with new positions in October and 4.25 million people that left their jobs. That indicates the robustness of the labor market. What is critical for future growth is continued strength in firms needing workers and that came through loud and clear in October. Openings shot up. At the same time, hiring was actually down, probably because of the worries created by the government shut down. Despite that uncertainty, there was still a solid increase in payrolls and the lack of hiring helped generate the strong November gains. The job opening increases were largely concentrated in professional and business services, manufacturing and construction. It's also important to analyze the types of separations, since they can be caused by people being fired, quitting or retiring. Here we get the best indication that the labor market is clearly getting better as the number of people quitting their jobs jumped while layoffs fell. The Great Recession had made workers fearful of leaving or even changing jobs and the rise in the willingness to make an employment move indicates growing confidence in the labor market. A rising quit rate may be an early warning sign to businesses that once jobs become more plentiful, the turnover rate could surge. Nothing costs more than having a high turnover of employees and I expect that that many companies will be shocked at how quickly their workers tell them to "take their jobs and shove it".
MARKETS AND FED POLICY IMPLICATIONS: The job market is improving, that is clear. The question is: Have conditions gotten strong enough to warrant the Fed to start tapering right away? I don't think so. St. Louis Fed President, James Bullard suggested that tapering could begin even before there was certainty about the job situation and if conditions deteriorated, tapering could be paused. I am not sure that makes a whole lot of sense. Does anyone really believe it is good monetary policy to start and stop a policy? It seems to point to uncertainty, something we could really do without. Also, if we go for a few months longer without starting to taper, the difference in the Fed's purchases might be only twenty or thirty billion dollars. That is not consequential. So to me, best policy practice would be to wait until conditions clearly warrant a tapering and then just do it. That implies a start no earlier than January but more than likely at the March meeting. After all this time and all the money invested, it is logical to err on the side of too much than too little and that is what I think the Fed will do.