WASHINGTON (Reuters) — The U.S. economy has decisively turned the corner with small business confidence hitting its highest level in more than six-and-a-half years in May and the number of jobs available rising to pre-recession levels in April.
The brightening growth picture was further boosted by another report on Tuesday showing a bigger-than-expected increase in wholesale inventories. The new figures added to employment, auto sales, manufacturing and services sector data in suggesting the economy was now in a full-fledged expansion.
"The list of indicators showing the economy is back continues to get longer every day," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. "It's getting harder and harder to point to slack in economic conditions."
The National Federation of Independent Business said its Small Business Optimism Index rose 1.4 points to 96.6 last month, the highest reading since September 2007.
It was the third straight monthly increase in the index, which is viewed as one of the leading indicators of economic growth. Five of the index's 10 components advanced, with big gains in sales and earnings expectations.
Small businesses were also very upbeat about prospects over the next six months. There were increases in both the share of business owners planning to create new jobs and those who believed this was a good time to expand.
In a second report, the Labor Department said job openings, a measure of labour demand, increased by 289,000 to a seasonally adjusted 4.46 million in April, the highest reading since August 2007.
Federal Reserve chair Janet Yellen and other policymakers at the U.S. central bank are watching job openings to help gauge the health of the labour market. The Fed is winding down a stimulative bond-buying program and eyeing a possible hike in interest rates sometime next year.
"Jobs are available. The economy is creating jobs at a fairly robust pace and there is every indication that will be sustained," said Millan Mulraine, deputy chief economist at TD Securities in New York.
With job openings increasing, there were 2.19 people for every available job in April, the lowest since June 2008.
"This is almost exactly in line with the average from 2000 to 2006," said Cooper Howes, an economist at Barclays in New York. "This suggests that there is little slack remaining in labour markets and that wage growth will be stronger."
The Fed, which has kept overnight interest rates near zero since December 2008, has pointed to labour market slack to justify its very accommodative monetary policy stance.
Despite the rise in job openings, hiring was little changed in April, a potential suggestion that employers are having trouble finding the workers with the right skills for the jobs available.
In a sign of confidence in the labour market, the number of people quitting their jobs rose.
In another report, the Commerce Department said wholesale inventories increased 1.1 per cent after advancing by the same margin in March.
The component that goes into the calculation of GDP — wholesale stocks excluding autos — also increased 1.1 per cent, bolstering views that inventories will buoy growth this quarter.
The economy contracted at a one per cent annual pace in the January-March period. Growth this quarter is forecast topping a three per cent pace.