Despite slowing home sales and a tightening of Fed policy, the labor market in the United States continues to expand. Total job openings in the economy rose to 7.14 million in the month of August, up from the 7.08 million in July that had been the record.
The job opening rate also hit a new high in August, climbing to 4.6% from the 4.5% previous record in July. The job opening rate is calculated by taking the ratio of job openings relative to the sum of jobs and job openings: JO/(J + JO), where JO = job openings and J = jobs. The rate measures the overall strength of the labor market by looking at how large the number of job openings is relative to the number of total jobs (existing and new) in the market. The rise in the job opening rate corresponding with near all-time low unemployment numbers therefore evidences an extremely robust labor market indeed. Typically, if there were already a large number of filled jobs on the market, even a strong number of new job openings would be overcome in the math by the much larger number of currently filled positions (J) in the economy.
Furthermore, the layoff rate and the quits rate are additional signs of a strong labor market. The layoff rate has dropped all the way down to 1.3% for private employers (from a peak of 2.2% in 2009), and the quit rate remained at a post-crisis high of 2.7%. In other words, businesses are doing what they can to hold on to their employees and employees feel comfortable enough with their job prospects to leave their current positions and seek new opportunities elsewhere. Both numbers are indicative of market optimism — employees are willing to leave a sure thing to find something better, and employers anticipate current trends to continue and thus want to hold on to their employees.
Finally, the monthly University of Michigan Consumer Sentiment Index fell slightly to a level of 99, down from September’s 100.1. This puts October’s consumer confidence just above the average for 2018. Levels are almost certainly even lower now, as the survey was taken before the recent plunge in the Dow. However, even if the average falls to its lowest level for the year, it would still likely be near the pre-recession average. The chart below illustrates just how high consumer confidence levels are now, compared to where they have been throughout the slow recovery from the 2008 Financial Crisis.
To sum up: the labor market appears to be extremely healthy, and consumer confidence, while waning slightly, remains high. Low unemployment, dynamic hiring, and a high rate of job creation — even relative to the large number of jobs already filled — seem to indicate a market optimism in strong fundamentals and continuing growth prospects. And consumers, while probably spooked by some combination of tariffs and a wild stock market, remain optimistic about the future.
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