This week: Hunt for the labor market's mojo continues

There’s no doubt the labor market caught fire at the end of 2015 after the government reported Friday that employers added 292,000 jobs in December and an average of 283,000 in the last three months. But has it regained a less visible vitality — its pre-recession mojo — that can propel more rapid economic growth? A report on labor market turnover could provide an answer as it leads off a light week of economic news that also features the latest readings on retail sales and industrial production.

The Labor Department’s Job Openings and Labor Turnover Survey, out Tuesday, has delivered consistently good news on job openings, which, at 5.4 million in September, continued to hover near all-time highs. But while the number of hires has risen during the recovery, it largely leveled off in 2015 and has lagged behind openings. That suggests that employers may be struggling to find qualified candidates and that at least part of last year’s solid job growth stems from fewer layoffs rather than a substantial pickup in hiring. Another concern is that the number of Americans quitting jobs leveled off in the first three quarters of last year after climbing steadily earlier. Workers’ willingness to leave one job for another is a sign of confidence in the economy and it can spur faster wage growth, says Lewis Alexander, chief U.S.economist of Nomura. Sharper pay gains have been the biggest missing element in the labor market’s recovery.  Its emergence could give the Fed more confidence that inflation is poised to pick up so it can raise interest rates further in 2016 after approving the first hike in nearly a decade last month.

Behind the resurgent job market is a confident consumer. Retail sales generally have increased smartly over the past year, leading stores, online merchants and restaurants to hire more workers. Economists estimate the Commerce Department will report Friday that sales overall rose just 0.1% in December, held down by low gasoline prices and a slowdown in auto sales, which boomed for most of 2015. But consumers continue to benefit from cheap gasoline, strong job growth and reduced household debt. And so economists figure a core measure of sales — one that excludes volatile autos, gas, food services and building materials — increased a solid 0.3%.

Factory output, by contrast, has been the economy’s problem child, battered by a weak global economy, a strong dollar that makes U.S. exports more expensive and a plunge in oil prices that has depressed energy investment. Economists estimate the Fed will report that industrial production dipped 0.1% last month in the latest of a string of declines.