US job openings drop to 10.8 million but are still too high for Fed

Vacancies at US employers retreated at the start of the year but remained historically elevated, highlighting persistent labor tightness that supports a higher level of interest rates from the Federal Reserve.

The number of available positions decreased to 10.8 million in January from an upwardly revised 11.2 million a month earlier, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Wednesday. The median estimate in a Bloomberg survey of economists called for 10.5 million openings.

The JOLTS release included the agency’s annual revision of monthly data back to January 2018. Almost every reading of job openings in the past year was revised higher, including a new record of 12 million in March 2022.

Despite the drop, the report highlights robust demand for workers that’s far in excess of supply, which has put upward pressure on wages and therefore inflation.

Fed Chair Jerome Powell spoke to the imbalance in testimony before the Senate on Tuesday, saying that the central bank could raise rates higher and potentially faster than previously thought should economic data continue to come in strong. He’s speaking again before the House on Wednesday.

Officials will be particularly tuned into the government jobs report on Friday, which is forecast to show strong hiring in February and the unemployment rate holding at a 53-year low. A separate report out earlier Wednesday showed US companies added more jobs than expected last month, according to ADP.

Construction, Accommodation

Job openings decreased in construction, accommodation and food services as well as finance and insurance. Meantime, vacancies rose in transportation, warehousing and utilities; and nondurable goods manufacturing jobs like chemicals, clothing and food processing.

The biggest decline in openings was at companies employing between 50 and 249 staff. Vacancies rose the most among businesses with less than 10 employees.

The ratio of openings to unemployed people edged down to 1.9 in January from 2 in the prior month, which matched a record high. It was around 1.2 before the pandemic.

Fed officials watch this ratio closely and have pointed to the elevated number of job openings as a reason why the central bank may be able to cool the labor market — and therefore inflation — without an ensuing surge in unemployment.

Even so, many economists expect the Fed’s policy to push the economy into recession over the coming year and for unemployment to rise to some extent.

The JOLTS report showed that the so-called quits rate, which measures voluntary job leavers as a share of total employment, dropped to 2.5%, the lowest since March 2021. That equates to around 3.9 million Americans.

Hiring increased, while the level of layoffs rose to the highest since December 2020. They were across professional and business services, real estate, construction as well as transportation and warehousing.