Employers Labor to Find Workers - September 24, 2018

The S&P 500 Index has hit several new highs over the last month. The Dow Jones Industrial Average, which has lagged, finally recaptured its January 26th peak on Thursday (MarketWatch data).

It gets back to the strong economic fundamentals – profit growth, economic growth, and low interest rates. These are powerful underlying supports for the market. It doesn’t guarantee higher stock prices next month or next quarter, but the fundamentals did cushion the downside earlier in the year.

When ongoing concerns (trade frictions) failed to dent the economic outlook, investors simply became accustomed to these concerns. They haven’t receded, but they get incorporated into the outlook. When new risks failed to materialize, investors refocused on the fundamentals.

A key factor that is aiding corporate profits is solid economic growth. An expanding economy equals expanding sales throughout the economy. Not surprisingly, businesses need new employees. And the help wanted sign is hanging in the window.

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But an unemployment rate below 4% means there aren’t many job seekers, and some jobs go begging. In July, there were a record 6.94 million job openings in the U.S. (survey began December 2000).

We also see it in first-time claims for unemployment insurance. At 201,000 in the latest week, first-time claims are at the lowest level since late 1969. Put another way, Richard Nixon had just become president.

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While wages have yet to turn higher, the tight labor market puts the job seeker in the driver’s seat.

An article that recently appeared on LinkedIn offers a unique perspective. Some job seekers are “ghosting” potential employers. They either cut off all contact during the interview process. Or, in some cases, simply snub their new employer and fail to show up for a new job.

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It’s a symptom of today’s robust economy.