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What JOLTS says about the jobs market – and everything else

·Editor focused on markets and the economy
·4 min read
In this article:
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This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Wednesday, January 5, 2021

Omicron is 2022 wild card, but lots of 'dry powder' is fueling demand

Nowadays, dispatches from the impossibly hot pandemic-era labor market have become a bit anticlimactic.

Yet they’re still worth highlighting, given that employers are still trying to cope with excess demand and open jobs, and the Omicron variant crashing down on the economy — driving new infections to over 1 million a day in the U.S.

On Tuesday, the Labor Department’s closely watched Job Openings and Labor Turnover Survey (JOLTS) found that there were over 10 million vacancies in the latest month, with a record 4.5 million people bidding adieu to their gigs. Stocks reacted in mixed fashion, but remained perched comfortably within view of record highs.

Yahoo Finance’s Emily McCormick reported that turnover was particularly high in the beleaguered food service industry, where Omicron is becoming a drag on indoor dining. Meanwhile, the sheer numbers of workers testing positive and having to isolate themselves are wreaking havoc on travel, retail and public services in urban areas. On Tuesday, Macy’s (M) was forced to cut store hours as new infections created new staffing headaches.

“The massive shortage of workers continues… because the economy is booming,” according to FWDBonds chief economist Chris Rupkey.

“The economic recovery is over and companies have shifted their demand for workers at a pace that is normally only seen during economic booms,” he said in a note to clients. “The economy is booming today but for how long is the question with the spread of the latest COVID variant that is closing many schools and slowing commerce and buyer traffic at many shops and malls.”

As we enter year three of the pandemic, COVID-19 still casts a pall over everything. But at a minimum, the JOLTS data reveal that soaring infections aren’t (yet) derailing one of the economy’s biggest macro trends: that is, a restless workforce desperately seeking greener pastures (i.e. better pay, benefits, work/life balance, etc).

"The very purpose of the workplace has changed,” JLL Work Dynamics Americas CEO Sanjay Rishi told Yahoo Finance Live on Tuesday. “The purpose of the workplace has to be a social hub... Talent is so portable.”

It underscores how underlying demand is still unwinding after 2020’s dramatic closures, and putting upward pressure on inflation and the need for labor. The latter is being exacerbated by restrictive vaccine mandates — one reason why the Morning Brief has highlighted their obvious failures as skyrocketing positivity rates lead to fewer workers on the job at all levels of the economy.

At a minimum, rapidly multiplying Omicron inflections haven’t yet led to the market’s worst case scenario: government-imposed lockdowns that would strand workers and businesses back at square one.

And with consumers and investors unable to count on support from expansionary fiscal and monetary policy this time around, most are opting to soldier on as best as they can.

“We are resolved to finally move beyond and pursue a new post-COVID normal, practice appropriate ongoing caution, and expect additional hardships,” market veteran James Paulsen of the Leuthold Group, wrote in a research note this week.

“But we are also determined to return to our routines and again embrace aspirations, interactions, and the business of fulfilling lives. Although COVID will still be with us this year, Americans are poised for the pandemic to become endemic,” he added.

Consumers “now have the wherewithal to continue to satisfy pent-up needs. Excess personal savings (above the normal pre-pandemic savings rate) have ballooned to about $2.2 trillion since March 2020 —almost 10% of nominal GDP,” the economist added. “Never in the postwar era has there been this much dry powder sitting on the sidelines waiting to be unleashed.”

The reason? One of the defining characteristics of this boom is “pent-up demand [that’s] more pronounced than at any point since at least 1970,” Paulsen pointed out, which he argued actually predates COVID and can be traced back to the 2008 crisis.

Consumers “now have the wherewithal to continue to satisfy pent-up needs. Excess personal savings (above the normal pre-pandemic savings rate) have ballooned to about $2.2 trillion since March 2020 —almost 10% of nominal GDP,” the economist added. “Never in the postwar era has there been this much dry powder sitting on the sidelines waiting to be unleashed.”

By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek

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