Investment Insights

Investment Insights: How About a JOLT(S)?

12 September 2018

By Cliff Aque, CFA, Investment Strategist

Some investors may remember the buzz around Jolt Cola back in the late ‘80s/early ‘90s, which had “all the sugar and twice the caffeine” as a regular cola. It reminds us of today’s amped-up job market, as confirmed by the U.S.Bureau of Labor Statistics’ (BLS) latest Job Openings and Labor Turnover Survey (JOLTS) released on September 11[1]. At the end of July, job openings remained at an all-time high of 6.9 million, which is higher than the number of people unemployed at 6.3 million[2] in July and down to 6.2 in August.

In a recent Investment Insights: Where is Wage Growth? we discussed the tight labor market and how more people were quitting their job than ever before, but questioned why there had not been more pressure on wage growth. People are still quitting jobs at record levels, rising from 3.47 million to 3.58 million in July. More importantly, it looks like pressure is building for wage growth, which grew 2.9% year-over-year, up from last month’s 2.7%.

Another item from the BLS that points to further pressure on wage growth is the continued shrinking of the labor participation rate which declined by two tenths to 62.7%. With fewer people available for a larger number of jobs, employers will have to pay more to attract the best talent.

Wage growth does not seem to be bothering companies as small business optimism hit an all-time in the most recent report from the National Federation of Independent Business Small Business Economic Trends Report NFIB.[3] A seasonally-adjusted 26% plan to create new jobs and 38% reported jobs they could not fill, both new highs. Of those trying to hire, 89% reported few or no qualified applicants, and a record-high 25% cited this as their single most important business problem. The balance of power finally appears to be shifting from employers to workers.

[1] https://www.bls.gov/news.release/jolts.nr0.htm
[2] https://www.bls.gov/news.release/empsit.nr0.htm?utm_content=buffere6439
[3] https://www.nfib.com/assets/SBET-Aug-2018.pdf