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LinkUp Forecasting Weak Jobs Report For May But Strong Gains In June
Game of Thrones always seems to be top of mind this time of year and as season 5 starts to wrap up, this year is proving, once again, to be no different. Even as some plot lines diverge from A Dance with Dragons, the show has been as wildly entertaining as the books, and this season (perhaps the best yet) keeps getting better and better. As Jason Hirschhorn put it perfectly this morning in his daily rantrave:// “GAME OF THRONES upped the ante last night.” (As an aside, by the way, REDEF has very quickly become a daily must-read). Between the shifting alliances in Westeros and across the Narrow Seas, the epic battles north and south of the Wall, and the political machinations in King’s Landing and elsewhere, not to mention the phenomenal characters, dialogue, story lines, and scenery, Game of Thrones might be one of fiction’s greatest roller coaster rides ever.
With similar twists and turns and equal uncertainty as to how it all might turn out, the roller coaster that is the current U.S. economy has been, of late, as thrilling and terrifying as anything we’ve seen from George R.R. Martin and HBO. With far greater consequences and far less entertainment value, the economy today is characterized, on one hand, by a flood of liquidity, record highs in the equity markets (with insane, beyond-bubble valuations in tech), low inflation, decent monthly job gains, and a healthy real estate market. But mystifyingly enough, the economy has also been beset by contracting GDP in Q1, non-existent wage growth and a somewhat disappointing labor market, mixed signals in consumer and business sentiment, mixed challenges from a strong dollar, and mild to severe weakness around the globe. And through it all, the debates rage on as to when the Fed will begin raising rates. Needless to say, the odds of forecasting where we’ll be at the end of the summer, let alone the end of this year, are about as good as trying to predict who will be alive at the end of Martin’s epic saga. And unfortunately, based on LinkUp’s jobs data from April and May, it looks like we’re in for further drama in the near future.
As a quick reminder (or as background for those that might be new to this blog), LinkUp is a job search engine that only indexes jobs from company websites. Unlike every other job site on the web that either accepts pay-to-post job ads or aggregates jobs from other pay-to-post jobs sites, LinkUp only lists job openings that are sourced directly from company websites. At the moment, our job search engine includes 3.1 million jobs indexed from 50,000 company sites in the U.S. and around the world. Because our index is updated daily, the jobs on LinkUp are always current, and there are no duplicate listings because we only index jobs from a single source – the employer’s website itself (and we do not include any jobs from staffing firms, headhunters, search firms, or temp firms). Perhaps most importantly, we have eliminated all of the garbage that pollutes virtually every job site on the web – “job” postings that include fraud, lead-gen, scams, identity-theft, phishing jobs, and money-mule listings, to name just a few.
As a result of all these factors, we offer job seekers the largest, highest-quality search engine of job openings available on the web. This, in turn, translates into the strongest value proposition in the market for our employer advertisers (high quality candidates at the lowest cost) who sponsor their openings and pay us, on a per-click basis, for candidates we send to their website. It’s also those very same factors that also provide us with an entirely unique data set of jobs that we have been able to successfully leverage to accurately predict job growth in future periods (see Bloomberg 2013/2014 NFP rankings here. See also Deutsche Bank’s market research report ‘Macro and Micro JobEnomics’ which finds that “accounting and quant factors based on [LinkUp’s] job posting data set provide incremental and uncorrelated alpha. As investment managers are continually in search of new and distinct sources of alpha, we think it’s worthwhile to investigate [LinkUp’s] job posting dataset as a differentiated source of stock specific and macro alpha.”)
In April, new job listings on LinkUp declined by 7% and total job listings increased by less than 3%, continuing the downward trend seen in LinkUp’s data since the beginning of the year.
Given the sound assumption that the best indicator of a future job being added to the U.S. economy is when an employer posts an opening on their company career portal, it’s that downward trend seen first in LinkUp’s new and total job listings that later translated into sluggish job growth so far this year, at least through the first quarter.
Even after adding the decent job gains in April, the labor market is still pacing behind the last 3 years and stands just barely ahead of levels last seen in 2011.
And with the 1.7% drop in the blended average of new and total job openings on LinkUp in April, we are forecasting that only 185,000 jobs were added to the U.S. economy in May, moderately lower than the consensus estimate of a net gain of 225,000 jobs.
But as the chart above indicates, however, new job listings on LinkUp rose sharply in May, and total job listings showed steady gains from April as well, pointing to much stronger job growth in June. Looking at the data on a state by state level, new and total job listings rose in 47 states, falling only in Connecticut, Hawaii, and North Dakota (total jobs also fell in Rhode Island).
Similarly, both new and total job openings rose in almost every job category.
Not surprisingly given the see-saw job market, the increase we’ve seen over the past 5 months in our jobs duration data can be interpreted in two different ways.
Each month, we take all of the jobs that have rolled off the site in the previous 6 months (presumably because they were filled with a new hire), and calculate the average number of days that those jobs were in our search engine. Last year, LinkUp’s job duration dropped from 51 days last April to 41 days last October, coinciding with strong job gains and increased ‘velocity’ in the pace of hiring that we witnessed for most of 2014. But since that time, job duration has climbed back up to about 48 days, where it has essentially stayed for the entire year. This increase in job duration reflects either a growing challenge that employers face in trying to find a sufficient number of job applicants to fill their openings or a slowdown in the pace of hiring (or some combination of the two). Either way, in any event, the elevated job duration we’ve seen for the past 5 months is undoubtedly having a negative impact on non-farm payrolls. How much exactly is anyone’s guess – and therein lies yet one more challenge in trying to determine where the labor market might be headed.
The U.S. labor market is either in solid shape and approaching full employment with 43 consecutive months of job gains or it’s faltering yet again, having never truly lived up to the hype given the nation’s stagnant wages, historically low labor-force participation rate, rising income inequality, and until quite recently, seemingly intractable long-term unemployment. And as if that didn’t present enough confusion, I could throw in demographics and retiring baby-boomers, the supposed skills-gap, and dire warnings of entire swaths of the economy that will soon be eliminated by seismic shifts in one industry or another or else replaced by robots and/or software. Like essentially every story arc in Game of Thrones, confusion and uncertainty abound, with little to no clarity whatsoever as to how this will all play out in the end.
I’m not sure which of the three I’d prefer least – being the Mother of Dragons, sitting on the Iron Throne, or serving as the Chair of the Federal Reserve.