The May 2019 jobs report was released a few weeks ago, revealing that just 75,000 jobs had been created during the month. This fell quite short of the projected number of 180,000. Although the previous 2 months had exceeded expectations for job creation, the findings in May have ignited fears that the small number is indicative of the market slowing down.
There has been talk that this could be the tipping point for the Fed to cut its benchmark interest rate for the first time in over ten years.
Back in 2008 during the Great Recession, the benchmark was lowered to an astounding .25%, where it remained until late 2015. It was then raised to .5% and since then, we have been on a gradual quarter-percent increase, with the rate currently sitting at 2.5%.
A lower benchmark rate typically results in an increased number of investors putting their money into higher-yielding stocks instead of bonds, as well as a boost in borrowing from banks by consumers and businesses. Basically, a lower benchmark would amount to a higher inflation rate.
Our gut reaction has been to panic, but is there really a reason to? Before we get up in arms about what the May jobs report really means, we must remind ourselves about where we stand in other areas.
It’s as if we’re forgetting that the US currently has a record amount of job openings, and that despite this most recent report, our 50-year low unemployment rate remains unchanged at 3.6%.
If the Federal funds rate happens to decrease, my guess is it will be due to combination of other factors affecting our economy, such as the proposed tariffs on Mexico. We need to dial back the fear of the market’s future and work with the issues we’ve got now.
There are still more than 6 million open positions that companies are struggling to fill. At this point, we have an equal amount of job openings as there are unemployed people. Remove those that are not currently qualified for many of these roles, and the shortage is more than 4.2 million people!
The Labor Department has been keeping track of job openings for nearly 20 years and March 2019 marked the first time we’ve had this balance of available positions vs. those who are unemployed. It’s even predicted that soon we will have more positions than there are those who are looking.
What we SHOULD be worrying about is how to fill these existing positions before we get fired up about not enough jobs being created. Even with companies switching up their hiring process and expanding their criteria, (e.g. not requiring college degrees) looking to draw in a wider range of candidates, they’re still having trouble finding new employees. Much of the struggle stems from a lack of qualified or interested candidates living in a given area that has hiring opportunities.
We need to find a way to sort this out before dumping more jobs into the mix.
Too many jobs and not enough workers sounds to me like a lot of failed businesses in the future.