Is The US Job Market Finally Overheating? The Answer In 40 Charts

The stock market hiccuped, and bond yields spiked on Friday after the latest jobs report showed that the Phillips curve is finally coming back to life as average hourly earnings spiked, rising by double the expected 0.2% M/M, and posting a 2.9% increase annually, the highest since the financial crisis.

This in turn has further entrenched the view that the Fed may be falling further behind the jobs and inflation curve – and will be forced to raise rates longer and higher than the market expects – as the US labor market is starting to overheat in earnest. Nowhere was this demonstrated more clearly than in the latest chartpack from Deutsche Bank’s Torsten Slok, who in over 100 slides of charts showed just how strong the US labor market has become.

Below we have excerpted some of the most notable observations and charts from the Deutsche Bank economist.

It currently takes 31 days to fill a vacant job, up from 23 days in 2006

Businesses are very worried about tight labor market

Much harder to fill a job today than in 2005-2006

Small business hiring plans at record high

Workers working part-time for economic reasons at pre-crisis levels

A broad-based pickup in wages in the pipeline. Wage cost measures above pre-crisis levels

Inflation theme not going away anytime soon

Wages trending higher across indicators

Wages trending higher

Average hourly earnings up both in goods and services sectors

Higher wage growth for job switchers than job stayers

Non-manager wage growth at post-crisis high

Labor market tighter now than in 2006 when the Fed funds rate was 5.25%

Almost 7mn job openings at the moment; was 2mn in 2009

More people voluntarily leaving their job is a leading indicator of wages

Leading indicators point to higher wages ahead

In 2010 there were 7 unemployed workers per job opening. Now it’s at 1

Total labor income strong – an important leading indicator of consumer spending

Getting closer to the terminal Fed funds rate? The Fed funds rate normally peaks when 80% of states have unemployment below the NAIRU

All jobs created since 2010 have been full-time jobs

Millennials have recovered completely from the financial crisis: Employment rate for people age 25-34 above pre-crisis average

Demographics dragging down employment to population growth

4mn people in the US are drivers

About half of the 4mn drivers in the US are truck drivers

This has been a recovery for people with education

The distribution of US employment

The distribution of employment by size and average hourly wages

Wage and income expectations among consumers elevated

Wage and income expectations among consumers elevated

Overtime hours up in August

Job openings trending up across sectors

Labor market slack declining across different measures

Unemployment duration still trending lower, we have reached full employment

Jobless claims at record lows

Short-term unemployment rate back to 2005 levels

Labor force participation rate marginally down to 62.7% in August

Fall in people not in the labor force who want a job

Disabled workers coming back into the labor market

Continued decline in the number of people on disability insurance. Likely the result of the very low unemployment rate

Despite opioid crisis and many on disability insurance many people outside the labor market are finding jobs

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