Optimistic outlook for small business and a sharp rise in job openings

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Job openings rose 22% year over year in July, according to a new report by the Bureau of Labor Statistics. A total of 4.7 million job openings were posted in July, compared to 3.8 million in July 2013 and 4.7 million in June.

The number of job openings has risen sharply in 2014 after slumping slightly in February on cold weather, a sign that businesses are investing more heavily for growing demand in the U.S. economy. Private industry jobs grew 22% year over year to 4.2 million, while government job openings rose 26% in the same period to 485,000.

While job openings have seen massive growth, actual job hires grew more modestly. In July, the BLS saw 7.7% growth in hires from the prior year, with 4.9 million total hires in July 2014. Quits remained relatively flat at 2.5 million.

Analysts have expected job hires to rise at an accelerating rate throughout 2014 on improved economic conditions and greater demand for goods and services translating into stronger hiring activity among hiring managers and employers. However, hires have remained below their pre-recession peak in late 2006 of about 5.3 million, while job openings have reached their pre-recession peak that occurred in the middle of 2007.

Jobs in business services, retail trade, transportation, utilities, and health services lead in total job openings. Business services saw 913,000 job openings, up 44% from a year ago.

Small Business Optimism Strengthens

Accompanying strong growth in total job openings, the National Federation of Independent Business saw more optimism amongst small businesses in August, with the NFIB’s Optimism Index rising 0.4 points to 96.1, the second highest reading since October 2007.

Despite the rise in headline optimism, the NFIB also said that small businesses do not have major plans to go on a hiring spree, with hiring growing by 0.02 workers on average on a seasonally adjusted basis in August. Net 10 percent of small businesses polled said they plan to hire in the coming months, down 3 points from the prior period.

Speaking on the results, NFIB Chief Economist Bill Dunkelberg said that small businesses remain far below a strong and sustainable growth rate, particularly when it comes to investment and job hiring. “Expectations are still glum, although improving grudgingly. More owners still think business conditions will be worse in six months than think they will be better. Few see the current period as a good time to expand,” said Dunkelberg, adding that low borrowing costs and satisfactory inventories were discouraging additional hiring or expansion activity at the current time.

Dunkelberg added that uncertainty and volatility were risk factors mitigating growth for small businesses. “There is so much ‘noise’ and uncertainty in the economic system that small business owners are finding it difficult to be optimistic in this environment”. Overall, small business is still not in a good place,” said Dunkelberg.

Low Churn, Low Wage Growth

Both the BLS report and the NFIB study indicate wage growth will remain sluggish for workers in the U.S. According to the NFIB, 25% of respondents reported rising wages for workers, while only 15% plan to increase wages going forward.

Despite few opportunities to rise pay, job churn remains at very low levels, with the BLS reporting total job quits remain well below pre-recession peaks in 2006 and 2007, when quits rose over 3 million. Many economists believe more quitting and hiring will be necessary before total aggregate wages rise on a real inflation-adjusted basis.