The US economy continues to improve in many areas which would indicate continued positive momentum and continued growth.  Today, our focus will be on the US Bureau of Labor Statistics Job Openings and Turnover (JOLTS) report and the Institute for Supply Management Manufacturing ISM Report on Business (ISM).

First, let’s focus on labor. For the past two years, employers have been slowly filling job openings, which has been a key complaint by business owners.  The lack of qualified applicants for their job openings has been a top three key issue for employers.  We referred several times last year to the National Federation of Independent Business survey of business owners who regularly report their inability to find qualified candidates. The US employers reached an all-time record of over 12.2 million unfilled job openings in March 2022.  Last week’s JOLT report indicated that job openings fell by 556,000 jobs to 7,7 million in December 2024. 

The Bureau stated in their February 4, 2025 report that:

• “The number of job openings decreased to 7.6 million (-556,000) on the last business day of December and was down by 1.3 million over the year. The job openings rate, at 4.5 percent, decreased over the month. The number of job openings decreased in professional and business services (-225,000), health care and social assistance (-180,000), and finance and insurance (-136,000). Job openings increased in arts, entertainment, and recreation.”

Since March 2022, the number of job openings has declined but remains at historic high levels that surpass even the strongest increase of job openings in 2018. At the same time, the US Bureau of Labor Statistics on February 7 lowered the US unemployment rate to 4.1% which is near the lowest level not seen since the late 1960s.

The challenge for employers is there are still millions of people who may be qualified but have not re-entered the workforce since 2020.  This may include spouses choosing to stay at home to raise the family or those starting their own business.  The result is that millions who were formerly employed in 2019 have not returned to a similar job.  These people are neither collecting unemployment benefits nor receiving W-2 income. 

Further confirmation is the Labor Force Participation Rate which continues to report levels of W-2 workers at the lowest levels not seen since 1977.  

So, where are millions of people working?  Our theory is that these people have pursued independent contracting roles or started their own businesses.  The US consumer is in better financial condition in decades which indicates they are earning an income but just not from a traditional W-2 job.  In fact, based on the data that includes the financial status of households, consumer spending, and consumer confidence,  the transition for many from W-2 income to independence has been a financial success. 

It is also fortunate for larger employers to finally be filling some of their job openings as they will need the help.  Economic activity appears to be picking up speed based on today’s ISM Manufacturing Report on Business.  In their report today they stated the index rose to 50.9 in January 2025 from a downwardly revised 49.2 in December 2024 and beating forecasts of 49.8.  Trading Economics made the following reference:

• “The reading pointed to the first expansion in the factory sector after 26 consecutive months of contraction. New orders increased at a faster pace (55.1 vs 52.1) while a rebound was recorded for production (52.5 vs 49.9) and employment (50.3 vs 45.4). Meanwhile, supplier deliveries were marginally slower (50.9 vs 50.1), inventories fell more (45.9 vs 48.4) and price pressures intensified (54.9 vs 52.5). "The Prices Index indicated increasing prices for the fourth consecutive month, likely reflecting the agreement and deployment of prices by buyers for 2025. Mill materials (steel, aluminum, and copper), food elements, and natural gas registered increases, offset by plastic resins and diesel fuel moving down in price", Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee said.”

What Does This Mean to Me?

The short answer is the US economy continues to expand due to business growth in revenue and profits.  There are many key fundamentals that can be attributed to the positive US economy including a free market constitution, reasonably favorable governance, fiscally strong consumer households, and proactive Federal Reserve policies.  The US is a sophisticated society that is the result of a majority of our 350+ million people being allowed to create and pursue vocations and lifestyles that vary significantly. 

My wife and I enjoy watching movies and afterward analyzing why it was great or not.  The great ones are an example of everything working.  The storyline, casting, acting, cinematography, music, and special effects are all excellent.  Movies that are less than great don’t have any one or more of these components.  Recently we watched “You Gotta Believe” starring Luke Wilson, Greg Kinnear, and Sarah Gadon.  Possibly the worst movie we have ever seen in our entire life.  It had none of the qualities to be watchable. We concluded it must have been written by AI with overworked platitudes, a predictable storyline, and marginal at best acting.

The point is that the US functions as well as it does because of key constitutional rights and freedoms that have remained non-negotiable.  This is not the case around the world. Compare the status of nearly all G7 nations (Canada, France, Germany, Italy, Japan, United Kingdom) that except for Italy are all struggling with their economic growth.  Germany is in its third consecutive quarter of contraction and high unemployment which was just a few years ago the engine of the EU. 

We maintain our favorable view of the US economy and stock market.  The stock market pause since December 6, 2024, is a welcomed and needed reprieve after two consecutive years of significant gains for the major indices.  We would anticipate the major indices to bottom sometime in the first half of 2025 which may be the foundation for the next rally to new all-time highs by the end of the year.

If you are not a client of Up Capital Management, this is an excellent time to meet and discuss strategies to achieve your financial goals.  Our focus on long-term financial planning and investment strategies has been a cornerstone of the services we provide to our clients.  Give us a call so we can discuss ways to assist you and your family.