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By Robert Johnson, CFA and Jeremy Glaser | 07-09-2014 12:00 PM

Jobs Data Improving, but Won't Change GDP

More small-business hires, a better mix of job openings, and the potential for wage growth--while positive trends--won't change Morningstar's Bob Johnson's GDP forecast.

Jeremy Glaser: For Morningstar, I am Jeremy Glaser. After the strong employment report in June, are there other signs the economy may be picking up steam? I am here today with Bob Johnson, our director of economic analysis, to take a closer look.

Bob, thanks for joining me.

Bob Johnson: It is great to be here today.

Glaser: We got a few data points this week the first being a small-business confidence report. What did this show you? Are small businesses still hiring?

Johnson: The small-businesses report has been improving three months in a row; it's been one of the real bright spots in the economy. Certainly we've seen it in some of the jobs data that has come out; these key hirers lately have been small businesses after kind of a slow start.

The number that we just got now for June--we had three great months in a row, we went from low-90s to mid-90s in a pretty quick fashion--and now we are back off just a little bit in the June data. But there was a real silver lining to that, so much that the kind of confidence stuff which I am not a big fan of--it's kind of "Wow, what do you think about the economy, and it is good time to be in your business?"--that backed off a little bit. But the key thing is employment: Are they actually putting their money where their mouth is? No, they are actually hiring more people; the hiring data continued to be strong as it has for the last three months. And so we've seen a pickup in the number of people they plan to hire. And in addition, the number of job openings that they are offering and how hard it is to find employees all looked better than they had the previous month despite the overall index ticking back just a little bit. I think the fact the employment part is holding up is really great news for the economy.

Glaser: Staying on the jobs front, I know a metric that you've been looking at more closely recently has been the job opening and labor turnover. Could you tell us little about what that report is and what the data look like for May?

Johnson: Yes, it lags a month. As you point out it is May data, but because job openings is a key part of this report, you have to have an opening before you can fill an opening. This is kind of a little bit of a precursor and so it actually shows up one, two or maybe even three months after posting until it is filled and turns up in employment report. So, it is an early indicator that way, but it does come with a little bit of delay. We have the May data, and there is a few things that we look at. First of all, it is the number of openings that are out there, and that was really a great number at 4.6 million job openings. And that number is up about 21% from from a year ago. So, that's really had a nice healthy increase in the overall number of openings. Government even was up 10%, and that number has been fairly flat for long time. So, we're glad to see at least some growth here in the government side of the equation year over year.

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