Real Time Economics: Just How Tight Is the Labor Market?


This post is by Jeffrey Sparshott from Real Time Economics


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The number of U.S. job openings has outpaced the number of unemployed for 14 straight months, the Fed is trying not to listen to the president, and gasoline prices are falling just in time for a trip to the beach. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

Career Opportunities

The number of job openings exceeded the number of unemployed Americans by the largest margin on record in April, signaling difficulty finding workers in a tight market, Sarah Chaney reports.

  • The actual number of openings, however, fell a little. The takeaway: “Labor demand is strong [and] employers are still finding it relatively difficult to fill jobs,” said Nick Bunker, at Indeed Hiring Lab. “Slowdowns happen. Just because this year won’t be as strong as last year doesn’t mean a recession is looming.”
  • Some of the recent slowdown in hiring could reflect a shrinking supply of people willing to work for the wages on offer. Construction is a bit of a case study: Job openings hit a new high while the number of unemployed jobseekers with construction experience fell to a new low.
  • “The record-high job openings at the end of April, record-low construction unemployment in May, and nearly 50-year low for the total unemployment rate underscore the challenge that contractors face in finding acceptable workers to hire. This difficulty, rather than a slowdown in demand for structures, may explain the weak employment gain in May,” said Ken Simonson, chief economist at the Associated General Contractors of America.

WHAT TO WATCH TODAY

U.S. producer prices for May are expected to rise 0.1% from the prior month. Excluding food and energy, prices are expected to climb 0.2%. (8:30 a.m. ET)

Mexico’s industrial production for April is out at 9 a.m. ET. The data could provide an early sign of how the second quarter is shaping up after a first-quarter contraction in gross domestic product.

President Trump is in Iowa with energy, farm and trade policy in focus.

China’s consumer-price index for May is out at 9:30 p.m. ET.

TOP STORIES

Just Nod If You Can Hear Me

Federal Reserve Chairman Jerome Powell’s first six months on the job were smooth sailing. The past six, not so much, Nick Timiraos writes.

  • Mr. Powell has learned that the economic outlook can change suddenly, that communicating with jittery markets is harder than it looks and that President Trump isn’t likely to make his job any easier.
  • Part of the solution: Tune out the president. Mr. Powell told colleagues they could give Mr. Trump what he wants—at tremendous cost to the institution’s hard-won credibility—or reflexively do the opposite, burnishing their independence in a way that risks recession. The right course, he said, is to make decisions based on their objective analysis of data.
  • Mr. Trump isn’t relenting. He called CNBC on Monday and complained about Fed policy: “They made a big mistake. They raised interest rates far too fast.”
  • Next up for Mr. Powell: a potentially term-defining decision—whether to cut interest rates to keep the 10-year expansion going.

Lowered Expectations

Another challenge for the Fed: Inflation expectations are falling. Already, the central bank’s preferred market-based measure is shy of its target. A New York Fed survey showed the public believes prices are softening further: expectations for inflation one and three years out were both the lowest since late 2017. The Fed believes where the public sees inflation going in the future exerts a strong influence on where it is now, Michael S. Derby reports.

U.S. consumer prices for May, out Wednesday at 8:30 a.m. ET, are expected to rise 1.9% from a year earlier, down from April’s 2% increase.

Eastbound and Down

The central bank story so far in 2019: Rate cuts in Malaysia, India, New Zealand, Australia and elsewhere in the East that may ripple through to larger economies in the West. But if we are on the cusp of a global easing cycle, it won’t look like the last one, Brian Blackstone writes.

  • Policy choices in the West are constrained by low and often negative interest rates. Faced with the unappetizing prospect of pushing rates further into negative territory, some central banks may choose to quickly dip into their unconventional toolboxes with asset purchases.
  • “If it’s a run-of-the-mill, cyclical downturn where growth dips below potential, then most central banks outside Europe and Japan have enough conventional tools to combat that,” says Neil Shearing, chief economist at Capital Economics. “The big question is what happens if there’s a big shock. There you get quite quickly to the limits of monetary policy.”

Road Trip!

Average retail gasoline prices have fallen in five consecutive weeks, putting many Americans on track to pay much less for fuel this summer and potentially boosting U.S. consumers at a time when many analysts are projecting a slowdown in economic growth. Gasoline prices dropped as U.S. crude oil fell into a bear market last week, Amrith Ramkumar and Dan Molinski report.

QUOTE OF THE DAY

“The Fed is always a lightning rod. Right now, there’s a lot more lightning.” —Julia Coronado, MacroPolicy Perspectives

WHAT ELSE WE’RE READING

Class of 2000 rules. Class of 2019 drools. “Compared with those who graduated [high school] into the strong 2000 labor market, the Class of 2019 still faces real economic challenges, as demonstrated by elevated levels of underemployment as well as low wages and worsened wage gaps for black workers,” Elise Gould, Julia Wolfe and Zane Mokhiber write at the Economic Policy Institute.

Load up on guns, bring your friends. “Firearms distributor United Sporting Cos. loaded up on guns ahead of the 2016 U.S. presidential election, expecting a surge in sales would follow the election of a Democrat. Then Hillary Clinton lost. The miscalculation sparked a multi-year decline that has reached the courthouse steps in Delaware, where United filed Chapter 11 bankruptcy on Monday,” Jeremy Hill reports at Bloomberg.

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