A couple of news reports today speak to the strength of the U.S. economy entering the new year. They also point to potential concerns in the coming months.
NFIB reports small business optimism increased in January.
The small business Optimism Index started the New Year in the top 10% of all readings in the 46-year history of the survey, rising 1.6 points to 104.3 in the month of January. Six of the 10 Index components improved, two declined, and two were unchanged, with the Uncertainty Index edging up slightly. Owners expecting better business conditions dipped slightly, but sales expectations and earnings trends improved significantly. As was reported last week, actual job creation surged in January.
At Calculated Risk, Bill McBride writes,
Usually small business owners complain about taxes and regulations (currently 2nd and 3rd on the “Single Most Important Problem” list). However, during the recession, “poor sales” was the top problem. Now the difficulty of finding qualified workers is the top problem.
It has been the top problem for some time, as NFIB Chief Economist William Dunkelberg observes.
“Finding qualified labor continues to eclipse taxes or regulations as a top business problem. Small business owners will likely continue offering improved compensation to attract and retain qualified workers in this highly competitive labor market,” Dunkelberg concluded. “Compensation levels will hold firm unless the economy weakens substantially as owners do not want to lose the workers that they already have.”
We suspect the difficulty in finding qualified workers contributed to a drop in job openings at the end of the year.
U.S. businesses sharply cut the number of open jobs in December for the second straight month, an unusual sign of weakness in an otherwise healthy job market.
The number of available positions dropped 5.4% to 6.4 million, a historically solid number that exceeds the number of those who are unemployed, the Labor Department said Tuesday.
In December there were 6.423 million job openings, and, according to the December Employment report, there were 5.753 million unemployed. So, for the twenty-second consecutive month, there were more job openings than people unemployed. Also note that the number of job openings has exceeded the number of hires since January 2015 (almost 5 years).
At some point, the challenges in filling vacant positions will exert a drag on economic growth. We do not yet appear to be at that point.