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More Job Openings Signal Optimism About U.S. Growth: Economy

July 9, 2013

July 9 (Bloomberg) -- Job openings climbed in May and hiring picked up as U.S. companies grew more upbeat about the economy’s prospects for the second half of the year.

The number of positions waiting to be filled increased to 3.83 million from the prior month’s revised 3.8 million, which was higher than initially estimated, the Labor Department said today in Washington. Openings are hovering close to a five-year high of 3.9 million reached in February. Another report showed more small businesses signaled they plan to add workers.

The figures follow data last week showing employers, emboldened by stronger housing and auto sales that underscore sustained demand, added more jobs than forecast in June. The momentum in the labor market gives Federal Reserve policy makers room to dial back record monetary stimulus aimed at spurring growth and getting more Americans back to work.

"Businesses are beginning to hire in a steady and more meaningful manner than they have in the past," said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, who projected 3.85 million job openings in May. "Hiring is not exceptionally strong but it’s steady and at fairly decent levels."

Stocks rose for a fourth day amid optimism companies will report better-than-forecast earnings for the second quarter. The Standard & Poor’s 500 Index advanced 0.7 percent to 1,652.55 at 12:45 p.m. in New York.

Struggling overseas economies remain a headwind for American companies. U.K. manufacturing unexpectedly shrank in May, casting doubt on the strength of the recovery in the second quarter. Factory output fell 0.8 percent after a 0.2 percent decrease in April, the Office for National Statistics said today in London.

 

IMF Forecast

 

The International Monetary Fund today trimmed its 2013 forecast for the global economy. It also reduced its projection for U.S. growth to 1.7 percent from an April forecast of 1.9 percent.

"The growth in the U.S. has slowed down, and they’re catching up to that," Jay Bryson, a global economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said after the IMF released its report. "This is not the U.S. economy of the 1990s that was a locomotive for the rest of the world," though the U.S. remains "one of the primary engines of growth."

The U.S. job openings data puts the labor market picture in sharper focus after the June employment report.

 

June Employment

 

Payrolls climbed 195,000 for a second straight month, while revisions added 70,000 jobs to the employment count for April and May, the Labor Department reported last week. The unemployment rate held at 7.6 percent, while hourly earnings in the year ended in June advanced 2.2 percent, the biggest year- over-year gain since July 2011.

A report today from the National Federation of Independent Business showed a measure of job creation plans rose to the fourth-highest since 2007. The Washington-based group’s index of small-business optimism eased last month to 93.5 from 94.4 in May.

The Jobs Openings and Labor Turnover Survey, or JOLTS, showed the number of people hired increased to 4.44 million in May, pushing the hiring rate to 3.3 percent from 3.2 percent.

There are about 3.1 job seekers for every opening, up from about 1.8 when the last recession began in December 2007. It reached a high of 6.7 in July 2009, the month after the recession ended.

 

Skills Mismatch

 

"In our view, a mismatch in skills between employers and job seekers is one of the factors that has contributed to higher structural unemployment relative to pre-recession levels," Cooper Howes, an economist at Barclays Plc in New York, said in an e-mail to clients. The ratio of job seekers to openings "has fallen sharply since the end of the recession and, given that it is already close to pre-recession levels, suggests that there may be less slack in the labor market that first appears."

In the 12 months ended in May the economy created a net 1.8 million jobs, representing 51.9 million hires and 50.1 million separations.

Sustained demand and the improvement in the labor market are giving Fed policy makers room to begin tapering their record $85 billion a month in bond purchases.

Chairman Ben S. Bernanke said last month the central bank might start scaling back its bond-buying program this year and end it in mid-2014 if the economy achieves the Fed’s growth objectives. Minutes of the Federal Open Market Committee’s June meeting will be released tomorrow.

 

Firings Stable

 

Total firings, which exclude retirements and other voluntary departures, were little changed at 1.74 million, today’s Labor Department data show.

Another 2.2 million people quit their jobs in May, up from 2.19 million the prior month. The quits rate held at 1.6 percent. It averaged 2 percent during the previous expansion and went as high as 2.3 percent in late 2006.

Retailers accounted for the biggest increase in available employment in May, while the category encompassing professional and business services showed a decrease.

Recovering home values and higher stock prices are putting Americans in a position to capitalize on lower interest rates and make big-ticket purchases, giving companies the confidence to keep hiring.

 

Motor Homes

 

An improved job market and rising consumer confidence are driving demand at companies such as Winnebago Industries Inc. That’s prompted the Forest City, Iowa-based maker of motor homes to take on more workers and increase overtime hours, according to Chief Executive Officer Randy Potts.

In the quarter ended June 1, Winnebago’s shipments of motor homes were the highest in five years, Potts said on a June 27 earnings call, up 55 percent from a year earlier. Order backlogs have grown for six consecutive quarters.

"Labor is always a challenge when you’re growing," Potts said. "We did find the people we needed to achieve the production rates we had scheduled. We worked a lot of overtime and we have hired a lot of people."


--With assistance from Ainhoa Goyeneche in Washington. Editors: Vince Golle, Mark Rohner

 

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

 

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

 

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