U.S. JOLTS: Job Openings Decline Sharply But Hiring Improves
The Bureau of Labor Statistics reported that the total job openings rate declined to 4.0% during December from an unrevised 4.3% in November. It was the lowest openings rate in two years and remained below the 4.8% record high in January 2019. The job openings rate is the job openings level as a percent of total employment plus the job openings level. The hiring rate improved to 3.9% but has been moving sideways since early last year. Separately, employers became less inclined to let workers go. The layoff & discharge rate held steady m/m at 1.2% and remained near the record low. The quits rate held m/m at 2.3% but has been trending higher for ten years. (…)
The level of job openings fell 5.4% (-14.1% y/y) to 6.423 million. It was the lowest level in two years. Private-sector job openings fell 16.3% y/y, but government sector job openings increased 10.5% y/y. (…)
Total hiring improved 1.4% m/m and rose 3.3% y/y. Hiring in the private sector rose 1.9% (3.9% y/y). Government sector hiring declined, however, by 6.3% (-5.5% y/y) to the lowest level in six months.
Why would job openings decline as much in this rather vibrant economy?
- “The Employment Trends Index increased in January, signaling solid job growth in early 2020,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “The improvement in the ETI, along with Friday’s job report and other indicators, suggest that employment growth has been accelerating after several weak quarters in 2019.
The small business Optimism Index started the New Year in the top 10% of all readings in the 46-year history of the survey, rising 1.6 points to 104.3 in the month of January. (…)
Small businesses started 2020 on a strong note, adding an average employment change per firm of 0.49 workers, the highest level since March 2019, according to NFIB’s monthly jobs report. The small business labor market overall is starting on a good note, with strong hiring and higher employee compensation.
Even with optimistic small biz owners, the ETI, which aggregates eight labor-market indicators, has been flat for 2 years. On a YoY basis, employment growth has slowed from +2.5% in early 2015 to 1.4%.
The importance of slower employment growth is that the most important contributor to consumer spending is losing weight. Sharply declining job openings is worrisome, even more so given that it is broad.
- The two-month decline in job openings was massive. (The Daily Shot)
Source: @Not_Jim_Cramer
A look at the US economy’s fundamentals provides further reason for caution. In steady state, an economy’s potential growth rate boils down to two things: people and productivity. On both fronts, the US has been struggling. Demographic changes mean smaller increases in the working-age population moving forward. Meanwhile, productivity growth has been steadily declining for many years. Adding those two figures together, Fathom Consulting estimates that US trend economic growth lies somewhere between 1.0% and 1.5%. Admittedly, US GDP has been expanding at rates above this recently. But it cannot continue to do so indefinitely. Putting the above analysis together, any short-term cyclical boost is unlikely to be maintained, implying a further easing in annual growth rates to a new normal that is closer to 1% than 2%. (Fathom Consulting)
Virus Update
- China death toll at 1,113, up by 97
- Confirmed China cases at 44,653, up 2,015
U.S. Travel Industry Set for Multibillion-Dollar Hit From Coronavirus The effective freeze on visitors from China is a blow to hotels, retailers and other businesses that have come to rely on their spending.
Residents of mainland China made 2.7 million entries into the U.S. in the first 11 months of 2019, according to the National Travel and Tourism Office, the third-highest tally among overseas countries after the U.K. and Japan. Chinese tourists contributed $35 billion to the U.S. economy in 2018, according to the U.S. Travel Association’s latest estimate. (…)
Travel economists said the outbreak could cost the hotel industry some 4.6 million overnight stays this year. That would be about a 0.3% hit to demand, said Jan Freitag, senior vice president at STR Inc., a hotel-data provider. He said that would be a bigger blow than it appears because many hotels are expected to see declining occupancy rates this year. (…)
OPEC cut forecasts for global oil demand as the coronavirus hits fuel use in China, leaving the group facing a renewed glut despite its recent production cuts.
The cartel reduced projections for demand growth in the first quarter by 440,000 barrels a day, or about a third, in its monthly report.
EARNINGS WATCH
We now have 351 reports in, a 71% beat rate and a +5.4% surprise factor. Actual earnings growth for these 351 companies is +2.3% which is the expected growth for all S&P 500 companies in Q4 (2.4%, up from –0.3% expected on Jan. 1). The quarter results are splitting the market in 2 clear segments: cyclicals are down and non-cyclicals up.
Where it gets interesting is that we are starting to get a feel for how Q1’20 results could be impacted by the coronavirus. In spite of much better than expected Q4 results, analysts have been reducing estimates for Q1’20 from +4.5% one week ago to +3.8% yesterday, down from +6.3% on Jan 1. Cuts have been broad with only Technology and Utilities being spared.
Also interesting is the sharp increase in the number of pre-announcements with both positive and negative guidance rising smartly but overall favoring the positive side.
Trailing EPS are now $164.53.
