IMF Sees Tepid Growth as U.S. Job Openings Surge, Hires Fall


Global growth is going to decelerate while American workers get fewer jobs as employers expect more for less.

The International Monetary Fund announced on Monday that it was cutting its outlook for global growth to 3.8% for 2015, down 0.2% from its July forecast. The IMF cited debt and lingering after effects of the burst housing bubble as headwinds causing growth around the world to slow down. “In advanced economies, the legacies of the pre-crisis boom and the subsequent crisis, including high private and public debt, still cast a shadow on the recovery,” the IMF said.

U.S. Workers Lose Out as Job Openings Rise

Meanwhile, U.S. workers are seeing more job openings, but their chances of getting a job are falling. While employers are advertising for more workers, they are hiring at a slower pace, according to a new report by the Bureau of Labor Statistics.

According to the report, job openings rose 4.3% to 4.8 million month-over-month in August, which was also up 23% year-over-year. Job openings are at their highest since January 2001, indicating more demand for labor. However, the BLS also saw a decline in hires, which fell from 4.9 million in July to 4.6 million in August. While hiring saw some gains earlier in the year, this month’s report erases those gains and makes the hiring rate roughly flat for the year.

Some pundits and business owners have complained that high-skilled workers are unwilling to work at wages companies are willing to pay, which has caused many job openings to remain open. In the New York Times, David Brooks has written repeatedly of a lack of high-skilled workers that have kept job openings unfilled.

At the same time, economists have noted that stagnant wages have kept many high-skilled workers from accepting jobs with below-market rate compensation, furthering the gap between job openings and hires. Economists expect stagnant wages to keep more skilled workers on the sidelines, while declining wages for low-skilled jobs, which are shrinking as a total portion of the labor supply in the United States, could cause lower demand to keep inflation and growth extremely low.

Mature Markets Stagnate, Emerging Markets Decelerate

Prolonged stagnation in the United States is met with a decelerating growth trend in emerging markets, as tightening monetary policy limits liquidity that in turn may depress demand for emerging market debt and equities globally as the Fed tightens its monetary policy. 

Until now, growing demand for emerging market debt has caused the Bloomberg USD Emerging Market Sovereign Bond Index to surge, rising over 8% year-to-date and over 9% for the past year. 

Most of those gains occurred earlier in the year, with the index falling 0.2% in the last three months, which may indicate slowing demand for high-risk debt in emerging markets. Emerging market equities have done worse, with the BlackRock Emerging Markets Equity Index falling 4.5% in the last three months, particularly threatened by a strengthening U.S. dollar.

With less liquidity for emerging market investment, economists are expecting growth in those regions to be sluggish. IMF Managing Director Christine Lagarde called the trend for decelerating growth the “New Mediocre”, adding that global investors and policymakers need to make raising growth “a priority”.

At the same time, Lagarde warned of frothy conditions in financial markets due to near-zero interest rate policies in advanced economies. “Downside risks related to an equity price correction in 2014 have also risen,” she said, “consistent with the notion that some valuations could be frothy.”