WASHINGTON (Reuters) – US job openings surged to a record high in April and small business confidence perked up in May, suggesting the economy was regaining speed after stumbling at the start of the year.
The economy’s stronger tone was reinforced by other data on Tuesday showing a solid rise in wholesale inventories in April, in part as oil prices stabilized.
“This is more confirmation that the economy is indeed emerging from that soft patch in the first quarter and can still pick up even faster in the next few months,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
Job openings, a measure of labor demand, rose 5.2 per cent to a seasonally adjusted 5.4 million in April, the highest level since the series began in December 2000, the Labor Department said in its monthly Job Openings and Labor Turnover Survey (JOLTS). Hiring slipped to 5.0 million from 5.1 million in March.
Economists say the lag in hiring suggests that employers cannot find qualified workers for the open positions. The number of unemployed job seekers per open job, a measure of labor market slack, fell to 1.6 in April, the lowest since 2007 and down from 1.7 in March.
“On balance, we read the April JOLTS data as suggesting labor market momentum remains intact in the second quarter and labor market slack continues to diminish,” said Jesse Hurwitz, an economist at Barclays in New York.
The JOLTS report is one of the indicators being closely watched by Federal Reserve policymakers as they contemplate raising interest rates this year. The U.S. central bank has kept the short-term lending rate near zero since December 2008.
Tightening labor market conditions were corroborated by a separate report from the National Federation of Independent Business that showed confidence among small businesses rising to a five-month high in May.
The share of businesses saying they could not fill open positions also increased to 29 per cent last month, matching February’s reading, which was the highest since April 2006.
The economy contracted at a 0.7 per cent annual pace in the first quarter and growth got off to a slow start in the second quarter, in part because of the lingering effects of a strong dollar and spending cuts in the energy sector. But a surge in job growth and automobile sales as well as gains in May factory activity suggest the economy is strengthening.
Prices for U.S. government debt fell, while U.S. stock indexes edged up. The dollar slipped against a basket of currencies.
In a third report, the Commerce Department said wholesale inventories increased 0.4 per cent in April after rising 0.2 per cent in March.
Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP – wholesale stocks excluding autos – rose 0.2 per cent, prompting economists at Barclays to bump up their second-quarter growth estimate by one-tenth of a percentage point to a 2.9 per cent annualized rate.
Sales at wholesalers surged 1.6 per cent in April, the largest rise since March of last year. Sales had been weak since last August, in part due to the negative impact of lower oil prices on the value of petroleum goods sales. That had led to an accumulation of inventory, leaving wholesalers with little appetite to buy more merchandise.
Petroleum sales jumped 4.9 per cent in April. At April’s sales pace it would take 1.29 months to clear shelves, down from 1.30 months in March. An inventory-to-sales ratio that high usually means an unwanted inventory buildup, which would require businesses to liquidate stocks. That would weigh on manufacturing and economic growth.
Economists, however, caution against reading too much into the elevated inventory-to-sales ratio, given the role that oil prices have played in depressing the value of petroleum goods sales.
Still, they expect an inventory drawdown in the quarters ahead, which is one of the reasons for less robust second-quarter GDP growth estimates. Inventories added a third of a percentage point to first-quarter GDP.