US labour market remains healthy with structural issues

Market participants have made more fuss about last month’s labour market report than it deserves. US labour market is much healthier than the great recession or even two years back by any measure and better than pre-recession by some measures.

Total job openings in the United States are now, well above 5.5 million, which is much higher than the level seen before the recession. During the peak 2007 boom, job openings (total) reached little above 4.82 million and  a previous peak was during dot com boom when openings reached 5.39 million. In April 2016 openings reached 5.78 million. Such numbers can be seen as quite healthy.

The economy looks healthier in almost every sector. Check out these numbers –

• Compared to peak 2007, manufacturing job openings are by 28,000, 1000 more for professional and business services, 217,000 more job openings in accommodation and food services, 340,000 more for education and health services. And 206,000 more in retail trade.

Mining and constructions are the only segments where job openings are down by 19,000 and 1000 respectively. But that is understandable, given lower price of commodities and construction boom in 2007.

Despite these levels of job openings, labour force participation rate has declined from 66 percent before the recession to 62.5% as of now. Labour force participation is at a level not seen since 1977.

So, when we look at job openings at record, unemployment rate at long-term level but participation rate at four-decade low and job gains are slowing down, we are bound to think that something else at play here –

The U.S. may not have enough skilled labors  as required. If that is the case, FED can do nothing to provide more jobs. Labour market reforms and fiscal stimulus in areas like education perhaps can make a difference.