Job Openings Strengthen Despite Labor Decline

More job openings are being posted as companies look for new workers, yet job growth in the private sector remains weak and wholesale goods sales begin to decline.  The Department of Labor saw 5.6 million job openings in the month of December, versus expectations of 5.4 and 5.3 in November. The 4.9% rise month over month in job openings is above the historic growth rate, while the total number of job openings remains far above the post-recession average.

More job openings are being posted as companies look for new workers, yet job growth in the private sector remains weak and wholesale goods sales begin to decline.  The Department of Labor saw 5.6 million job openings in the month of December, versus expectations of 5.4 and 5.3 in November. The 4.9% rise month over month in job openings is above the historic growth rate, while the total number of job openings remains far above the post-recession average.

Although more job openings are materializing, this does not mean there is more hiring activity. In a trend that has remained steady since 2013, the hiring rate has changed very little, even as companies look for more workers. In total, there were 5.4 million hires in December, “little changed from November,” according to the Labor Department.

While the number of hires has eclipsed the pre-crisis peak of 5 million in December 2007, a 3.7% hiring rate in December is below many analysts’ expectations. Confidence in a strengthening economy, seasonal demand, and renewed strength in a tightening labor market were all supposed to drive hiring rates higher.

The Skills Debate

Economists continue to disagree on why there is an unexpected divergence between job openings and hiring rates has continued.

Some point to weakness in some industries, such as utilities and construction, while other industries, accommodation and food services, saw the biggest job gains (93,000 total new jobs added). Higher paying industries saw lower hiring rates overall.

Two camps interpret this trend, which has carried on for several years. According to one school of thought, there is a lack of highly skilled, educated workers in America that can fill the jobs required by modern, technologically sophisticated companies. They argue that Americans are unqualified for the jobs companies need, and that foreign labor should be imported to fill in the gap.

Others argue that the skills gap would evaporate if companies offered higher pay. They point to the fact that Americans are more educated now than at any point in history, while wage growth is at its lowest point in history.

Despite skyrocketing tuition costs, the college education rate is higher than it has ever been. Yet companies continue to complain that workers are not as qualified as they require. Economists counter that on-the-job training and higher compensation would eradicate these concerns, and they dismiss companies’ complaints as attempts to negotiate down pay.

Weak Sales and Inventories

Economists argue that the decline in higher-paying job growth has seen a significant negative drag on demand. They cite this as the reason industrial production indicators have fallen in recent months expect to grow weaker.

A report by the Census Bureau on wholesale trade seems to confirm this hypothesis, as December’s wholesale trade fell 0.3% from November’s level, after seasonal adjustments. Total wholesales fell to $440 billion, while wholesale inventories fell 0.1% to $582 billion.