JOLTS: May Job Openings Up Minimally - Hires Plunged

The Bureau of Labor Statistics reported in the Job Openings & Labor Turnover Survey (JOLTS) that for May, the number of job openings rose 0.4% from April. The rise followed April's 1.6% drop after declines during most of the prior twelve months. Since their peak in January of 2007, the number of job openings have fallen 14%.

In addition, the job openings rate during May was unchanged m/m at 2.6%. The latest figures are down from near 3% one year ago. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.

The actual number of job openings in the manufacturing sector fell 3.3% (-31.0% y/y) in May and professional & business services job openings fell 11.1% (-11.2% y/y). Job openings in the education & health sectors also fell but by a more moderate 1.8% (-3.9% y/y) and job openings in retail trade surged 13.3% (7.9% y/y).

By region, openings in the South were weakest, off 19.2% y/y. In the Midwest openings fell a lesser 5.6% and they were off 8.0% y/y in the West. In the Northeast job openings also fell 8.0% y/y .

The hires rate plunged to 3.1% from 3.4% in April.The hires rate is the number of hires during the month divided by employment.The latest figure was the lowest since 2003. The actual number of hires plunged 8.8% (-11.8% y/y) and that was the sharpest m/m decline in the series' short record which extends back to 2001. Hires in the trade & transportation sectors fell 11.5% (-20.5% y/y) and construction sector hiring plunged 22.1% (-15.5% y/y).

The job separations rate held stable m/m at 3.2%, down from 3.7% at the peak. Separations include quits, layoffs, discharges, and other separations as well as retirements. The level of job separations fell 3.5% y/y.

The JOLTS survey dates only to December 2000 but has since followed the movement in nonfarm payrolls, though the actual correlation between the two series is low.

A description of the Jolts survey and the latest release from the U.S. Department of Labor is available here.

Bank Lending , Financing Constraints and SME Investment is a working paper from the Federal Reserve Bank of Chicago and it can be found here.

Euro Area GDP grew by 0.7 percent (simple Q/Q rate; also 2.9% saar) in the first quarter from the fourth quarter, and was up 2.1 percent year on year. The figures show a downward revision to provisional figures reported on June 3. Eurostat provisionally had put first quarter growth at 0.8 pct quarter on quarter and 2.2 pct year on year. The revisions themselves are small and inconsequential but hint at things to come…

Government can only do so much…

The data in the table below shows that government spending slowed in Q1 on a Yr/Yr basis but sped up Q/Q. A number of Euro-members are having to be careful with fiscal outlays and mindful of the constraint the EC Commission imposes on deficits relative to GDP, especially as GDP slows. Even a strong quarter’s worth of government spending did not boost the Yr/Yr result for the sector or maintain GDP growth overall.

Domestic demand is slowing despite a good quarter

Domestic demand slowed in the zone Yr/Yr but surged in its Q/Q growth. Here the Yr/Yr trend is more telling since domestic demand has been tracing out a saw-tooth irregular pattern over the past four quarters on a Q/Q basis. After posting Yr/Yr quarterly growth rates of 2% or more in recent quarters domestic demand dipped to 1.6% in 2008-Q1. In various EMU surveys the consumer sector continues to come up as very weak. It has grown at a seemingly stable Yr/Yr pace of 2.1% for the last two quarters while, in reality, the last two quarters of growth on a quarterly basis were a very weak minus 0.3% (saar) in 2007-Q4 and a still anemic 0.7% (saar) in 2008-Q1.

Capital spending trends show some resilience but are still challenged

Capital spending has been erratic as well. But at 2.9% Y/Y it is only barely the weakest quarter in the past four. In quarterly growth capital spending surged in Q1 and that may have had more to do with the good weather than with economics. The surge abuts a very weak 1.6% growth pace for 2007-Q4. Its erratic nature makes its trend hard to pin down. In surveys of industrial orders, however, it is clear that the capital goods sector remains the strongest in the euro economy but even it has begun to lose upward momentum.

Trade softens

Trade continues to augment GDP but its contribution to Q1 growth (Q/Q) was negative as the net export position turned negative and registered a sharp slowdown from the previous quarter. Export growth and import growth each made strong gains from the previous quarter as imports grew faster, but Yr/Yr exports still have the edge and on that basis trade boosted GDP growth again.

Got recession?

If imports continue to gain on exports as consumer demand is fading the Euro Area could be challenged to maintain growth. In such an environment it would be difficult to see capital spending holding up and the capital goods sector is still the stalwart of the Euro Area. But capital spending needs a reason and the reason in Europe is fading as the currency is too strong to support export sales and domestic demand is faltering, hampering domestic investment. On top of that, overall world demand is simply slowing. The EMU economy is slowing too and it is reasonable to ask if it will tip into recession, especially given the ECB’s overriding concerns about inflation. We may soon see if the ECB is very serious about its recent cautioning since has noted that the risks to growth are on the downside. Indeed, they are.