WASHINGTON (Reuters) - U.S. job openings jumped to their highest in six years in February and there was a significant decline in layoffs, more signs of a steadily improving labor market.
Job openings, a measure of labor demand, increased 299,000 to a seasonally adjusted 4.17 million, the Labor Department said in its monthly Job Openings and Labor Turnover Survey on Tuesday. That was the highest level since January 2008.
Hiring advanced 1.6 percent and layoffs tumbled 4.9 percent. Even more encouraging, more people are quitting their jobs, a sign of confidence in the labor market.
“The report is upbeat and dovetails with the improved February and March payroll data,” said Ray Stone, an economist at Stone & McCarthy Research Associates in Princeton, New Jersey. “The improvement in job openings foreshadows somewhat faster payroll growth in the months immediately ahead.”
Job growth averaged about 195,000 per month in February and March, with the unemployment rate holding at near a five year low of 6.7 percent over that period.
The report is one of the indicators being closely watched by Federal Reserve Chair Janet Yellen and other policymakers at the U.S. central bank to gauge the health of the jobs market.
With job openings rising and unemployment trending lower, the number of unemployed job seekers per open job tumbled to 2.50 in February, the lowest level since July 2008. This ratio was at 2.64 in January.
“This is almost exactly the average seen from 2002 to 2004, a period over which the unemployment rate averaged 5.8 percent,” said Cooper Howes, an economist at Barclays in New York.
“This suggests that there is little slack remaining in labor markets and that future wage growth will be stronger than it was at similar levels of the unemployment rate during past cycles.”
There is growing concern among economists that the Fed might be overstating the slack in the labor market, with measures such as the short-term unemployment rate having fallen sharply and the decline in the labor force being more structural in nature.
As such, the central bank might be too slow to start raising benchmark interest rates, which it slashed to a record low of zero to 0.25 percent in December 2008 as it battled the worst recession since the 1930s, they say.
According to Stone, an analysis of the relationship between job openings and the unemployment rate, the so-called Beveridge Curve, suggested an increase in structural unemployment.
The evidence of a skills mismatch, in which job seekers do not have the right skills for the positions available, could mean the Fed’s expectation that the unemployment rate could be pushed down to between 5.2 and 5.6 percent without sparking a inflationary rise in wages is too low.
“It may be that with the 6.7 percent unemployment rate that we had in both February and March we are closer to their long-run objective than they think they are,” said Stone. “The employment gap may be closed sooner than if the unemployment rate has to drop to 5.6 percent.”
In February, job openings increased in professional and business services and trade, transportation, and utilities. Hiring was led by strong gains in business and professional services, construction and education and health services.
Reporting by Lucia Mutikani; Editing by Meredith Mazzilli