MARKET TRENDS: Job Openings at Record High; Trade Deficit Widens

U.S. job openings nearly reached a 15-year high in May. Job opening rates have improved considerably faster on a yearly basis than the unemployment rate or number of total hirings. Job openings in the U.S. nonfarm sector grew 0.5% to about 5.36 mn in May, the U.S. Bureau of Labor Statistics said on Tuesday.

The May job openings were above the market expectations of 5.35 mn and April’s revised reading of 5.33 mn (initial reading of 5.38mn). However, labor turnover has been muted, as reflected by separations and hiring rates that moved down in May.

The number of hires in May slipped for the second straight month to 5.0 mn, while the number of separations was down at 4.7 mn over the previous month. The quit rate was unchanged at 1.9%, and the layoffs and discharges rate was little changed at 1.2%. The quit rate is a sign of strength, since quits are generally associated with people finding better jobs.

The gap between openings and hires indicates a mismatch in the jobs market. Employers are unable find workers with suitable qualifications, and are also hesitant to increase salaries to attract more talented applicants. Average hourly wages were consistent between May and June at $24.95 and have increased by a small 2% over the past year. That said, the new jobs that have been created hints at the possibility that job growth and wages will improve going forward.

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Meanwhile, a sharp decline in U.S. exports led to a widened trade deficit in May. Exports dropped the most in the past three months, raising concerns over the weak demand for the U.S. goods in the international market and a strengthening U.S. dollar.

The U.S. dollar has been rising since the middle of last year, after the Federal Reserve announced an intention to raise interest rates, making U.S. exports less competitive abroad. The trade deficit increased 2.9% to $41.9 bn in May, the Commerce Department said on Tuesday.

However, the increase in the trade gap was lower than market expectations of $42.6 bn. In April, it contracted 10% to $40.9 bn on lower imports. Exports have remained soft over the past six months. May exports slid $1.5 bn, or 0.8%, to $188.6 bn on a drop in overseas sales of U.S.-made capital goods, while imports edged down by about $300 mn, or 0.1%, to $230.5 bn during the month.

Exports of goods to Germany fell 6.0% in May from the prior month, while those to France fell 4.2%. Sales to Mexico were down 2.1% and Japan exports shrunk 3 At the same time, U.S. net imports of oil fell to $5.8 bn in May, the lowest level since 2002. Nonetheless, a lower-than-expected rise in the trade deficit may encourage better economic growth in the second quarter.

The U.S. economic outlook fell for a third straight month in July, while the six month outlook gauge fell to a 10-month low. This was reported by the Investor’s Business Daily (IBD) and TechnoMetrica Institute of Policy and Politics (TIPP) Economic Optimism Index. The IBD/TIPP Economic Optimism Index came in at 48.1 in July, below market expectations of 48.9. It was unchanged from the previous month and down from 49.7 in May, reflecting a pessimistic outlook. A level above 50.0 indicates optimism, while below 50 indicates pessimism. The Index had touched levels above the benchmark twice in the start of 2015, with cheaper gasoline prices. However, the energy prices have rebounded significantly from January’s lows, undermining the economic optimism.

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