Great Job Market Moves Closer to Good

Owners of small U.S. firms found the tight labor market a little less tight in June, and moderated their ambitious plans to increase hiring and wages. That's according to the latest monthly survey from the National Federation of Independent Business, due out later today.

For months the historically strong U.S. labor market seemed to be gently evolving from great toward merely good. Then last month’s NFIB report showed an uptick in business owners’ plans to add staff and lift wages. These pleasantly reassuring economic signals had this column asking if the U.S. labor market might actually be getting better.

But the new NFIB report for June, while showing that the U.S. still enjoys a historically robust labor market, suggests across a number of measures that jobs and wage increases might be less plentiful in the future.

NFIB Chief Economist William Dunkelberg reports:

Forty-two percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 2 points from May. The share of owners with unfilled job openings far exceeds the 49-year historical average of 23 percent although it is 9 percentage points lower than the record high of 51 percent last reached in May 2022. Thirty-five percent have openings for skilled workers (down 3 points) and 18 percent have openings for unskilled labor (down 2 points).

Owners of small firms also seem to be under a little less pressure to raise wages. NFIB reports:

Labor cost reported as the single most important problem to business owners decreased 2 points to 8 percent, 5 points below the highest reading of 13 percent reached in December 2021.

The NFIB survey also finds that owners are still in expansion mode, but they're not fanatics about it. “Owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 15 percent planning to create new jobs in the next three months, down 4 points from May,” notes Mr. Dunkelberg, who adds that the current figure is now “17 points below its record high reading of 32 reached in August 2021.”

It is still a great time in America to look for a job—just not as great as it was. The NFIB economist adds, “Overall, 59 percent reported hiring or trying to hire in June, down 4 points from May.”

It’s also getting a little harder for workers to secure raises, according to the NFIB:

Seasonally adjusted, a net 36 percent reported raising compensation, down 5 points from May and the lowest since May 2021. A net 22 percent plan to raise compensation in the next three months, unchanged from May.

This suggests that today’s inflation, even though not as bad as last year’s, may still be extremely challenging for workers and consumers.

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James Freeman is the co-author of “The Cost: Trump, China and American Revival” and also the co-author of “Borrowed Time: Two Centuries of Booms, Busts and Bailouts at Citi.”

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(Teresa Vozzo helps compile Best of the Web.)

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