America's companies might be running out of people to hire

The number of employers saying they can't fill open jobs is surging while the number of people being hired each month is starting to fall.

In short, something looks wrong in the labor market.

In a note to clients on Wednesday, Ian Shepherdson, chief economist at Pantheon Macro wrote that, "One of the possible explanations for the slowdown in payroll in growth in recent months is that the pool of labor has shrunk to the point where employers can't find the people they want to hire."

Shepherdson cites the following chart, showing the continued uptick in employers who can't find workers while payroll gains have started to decline.

In the past, there's always been a reason for payroll gains to start declining. Either labor slack was being taken up rapidly, an exogenous event like Hurricane Katrina slowed hiring, or the economy went into recession.

But in Shepherdson's view, there isn't any reason to believe something is awry in the US economy, and nothing from the outside seems to be acting negatively enough to change the trend in payrolls.

And so standard economic thinking here tells you that fewer workers for more openings means higher wages. The economic textbook also tells you that higher wages leads to more disposable income which probably leads to inflation.

Under this framework, the Federal Reserve should perhaps look to raise interest rates (but not definitely, of course: we could argue about whether the Fed ought to want to be "behind the curve" or not).

But right now, the Fed's rate policy and recent jawboning indicates that they do not see inflation pressures as imminent, though never before have payroll gains started to decline without a Fed tightening cycle (which is, presumably, prompted by too-strong inflation pressures).

And so the question is: will employers pay their current employees more, will they hire workers they otherwise wouldn't have deemed qualified, or has something else changed in the economy?

Job openings are still surging, but the hiring rate is flat. Something will give.