JOLTS job openings and hires dip from record highs, but labor markets still tight

JOLTS job openings and hires dip from record highs, but labor markets still tight

* JOLTS data for August showed a moderate 660k decline in job openings from an upwardly revised 1.1 million to 10.4 million and a 440k decline in hires from 6.8 million to 6.3 million, but both remained near all-time highs, indicating that labor markets in August experienced weaker demand due to delta variant related health concerns, but continued labor supply shortages (Chart 1).

* Declines in job openings were concentrated in sectors most impacted by the surge in COVID-19 cases: accommodation and food services (-178k), state and local government education (-124k), and health care and social assistance (-224k) (Chart 2). Hiring was similarly constrained in these sectors with hiring in accommodation and food services falling by 240k and hiring in state and local government education falling 160k. The declining labor market activity in these sectors is consistent with the August Employment Report.
* Openings and hiring softened across a broad range of industries, but remain significantly elevated relative to pre-pandemic baselines despite moderate declines in August. For example, although openings declined by 36k in the manufacturing industry to 870k, they are more than double what they were in February 2020 (402k). In anticipation of the upcoming holiday season, and in response to increased retail foot-traffic and burgeoning supply chain disruptions, job openings in retail trade, and transportation, warehousing and utilities strengthened rising 4.7% and 7.4%, respectively.

* Despite the decline in both job openings and hiring, the gap between hires and openings remains elevated at 4.1 million (Chart 3). The substantial gap between openings and hires in August points to labor market tightness, with demand for workers remaining strong, while labor supply is constrained. Factors that have dented labor supply include health concerns during the delta driven COVID-19 surge, uncertainty over the return to in-person schooling, and government subsidies that provide a cushion to people who are not working.

*The imbalance between labor demand and supply, evidenced by the gap between openings and hires, has contributed to accelerating wages. Average hourly earnings rose 0.4% in August, lifting their 6-month annualized increase to 4.5%, while average hourly earnings of production and nonsupervisory workers in the private sector are up 5.5% yr/yr. We anticipate that health concerns dissipate, demand for labor will remain strong, and labor market conditions will improve further even as supply constraints linger.

*The quits rate rose to a record high of 2.9% of the workforce, while the total private quits rate rose to a record 3.3%, reflecting the confidence workers have in securing new employment, and the improved bargaining position workers have given labor supply shortfalls (Chart 4). Quit rates are particularly elevated in sectors impacted by the COVID-19 surge, with the quits rate in accommodation and food services spiking to an all-time high of 6.8%.

Chart 1: Job Openings and Hires (millions)

Chart 2: Job Openings by Industry (millions)

Chart 3: Job Opening – Hire Gap (millions)

Chart 4: Quits Rate (%)

Mickey Levy, mickey.levy@berenberg-us.com

Mahmoud Abu Ghzalah, mahmoud.abughzalah@berenberg-us.com

© 2021 Berenberg Capital Markets, LLC, Member FINRA and SPIC

Remarks regarding foreign investors. The preparation of this document is subject to regulation by US law. The distribution of this document in other jurisdictions may be restricted by law, and persons, into whose possession this document comes, should inform themselves about, and observe, any such restrictions. United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. Copyright BCM is a wholly owned subsidiary of Joh. Berenberg, Gossler & Co. KG (“Berenberg Bank”). BCM reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without the BCM’s prior written consent. Berenberg Bank may distribute this commentary on a third party basis to its customers.

Member FINRA & SIPC
This email and any files or attachments transmitted with it may contain confidential or privileged information and are intended solely for the use of the intended recipient. If you are not the intended recipient, please do not copy, retain, disclose or use any part of the message or its attachments. Please notify the sender immediately by return email and destroy or delete any copies. Dissemination or use of this information by anyone other than the intended recipient is unauthorized and may be illegal. Communications by email cannot be guaranteed to be secure or error-free. Emails and their attachments are subject to being intercepted, becoming corrupted, getting lost or delayed, or may contain viruses. Therefore, neither the sender nor Berenberg Capital Markets LLC (BCM) accepts any liability for any errors or omissions in the content of this message or problems in its transmission, including those arising as a result of its transmission over the internet.
BCM does not assume liability for the correctness and completeness of all information given and/or attachments contained herein. The provided information has not been checked by a third party, especially an independent auditing firm. BCM explicitly points to the stated date of preparation. The information given can become incorrect due to passage of time and/or as a result of legal, political, economic or other changes. BCM does not assume responsibility to indicate such changes and/or to publish an updated document. Any document(s) or attachment(s) is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers.
In light of upcoming regulatory changes, please be informed that BCM will continue to share information with you until unsubscribe@berenberg-us.com receives your termination/deletion request. For more information about the General Data Protection Regulation (GDPR) and our privacy policies please refer to https://www.berenberg-us.com/legal-notice. BCM reserves all the rights in this communication. No part of this communication or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without BCM’s prior written consent.
The information contained herein and sourced may have been adopted from various news sources, for example, Bloomberg, Reuters, Street Account and various other sources. BCM does not claim accuracy, completeness, timeliness, suitability, or otherwise regarding all the information on the securities, stock markets, or developments referred to within. On no account should the Content be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgments. BCM is not responsible for any recipient(s) use of this information. This Content is not a solicitation or an offer to buy or sell any of the securities contained herein. This information does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of clients. Clients should consider whether any advice or recommendation in this Content is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of securities which may be referred to in this Content and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain securities.