Job Vacancies vs. Equities – 2014 divergence. Job vacancies in the United States is reported by the U.S. Bureau of Labor Statistics. The actual job vacancies have decreased to 3414 Thousand in December of 2013 from 3603 Thousand in November of 2013. As we can see from the thumbnail chart, these job vacancies have come to a startling divergence in recent months. What could this be telling us?
Many market economist when looking at the labor component, looks mostly at the unemployment rates to determine the health of the economy – we know how the market reacts when they release the infamous NFP report each month. But recently with other factors like, birth death rates or labor participation rates, the unemployment rate lacks sufficient importance. Job vacancies in some way maybe a better forward indicator, as it is expressing business intent vs. what they have done, as unemployment data tends to be lagging.
First a little about that data point. Job vacancy statistics provide information on unmet labour demand. Information on job vacancies is used for business cycle analysis and assessing mismatches on labour markets. A job vacancy is defined as a paid post that is newly created, unoccupied, or about to become vacant:
[ol]
[li]for which the employer is taking active steps and is prepared to take further steps to find a suitable candidate from outside the enterprise concerned; and
[/li][li]which the employer intends to fill either immediately or within a specific period of time.
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A vacant post that is only open to internal candidates is not treated as a ‘job vacancy’, whereas vacancies from temporary work agencies are counted in the business sector where the vacancy is, not in the agency.
So job vacancies are in a nose dive while equity markets are banging on the ceiling, wanting to go higher. Some of the ISM and PMI numbers have also recently come in weak. Some believe that this is due to the bad weather, that the US has experienced over the winter, and there is a hiring boom ready sprout in the spring. At least this what the Fed is telling us – click here. We shall have to wait and see, but this may be a warning signal that equities are in their final move to the top.
Blue Point Trading, William Thompson