US job openings stay elevated as labor market remains tight
- Job openings decrease 410,000 to 10.8 million in January
- Fewer workers voluntarily quitting their jobs
- Layoffs up, and were higher than initially thought in 2022
WASHINGTON, March 8 (Reuters) - U.S. job openings fell less than expected in January and data for the prior month was revised higher, pointing to persistently tight labor market conditions that likely will keep the Federal Reserve on track to raise interest rates for longer.
But the Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Wednesday also hinted at some cracks in the labor market. Layoffs rose to a two-year high in January and job cuts were higher than initially thought in 2022. Fewer people voluntarily quit their jobs.
Nevertheless, the labor market remains strong, with 1.9 job openings per every unemployed person, down from 2.0 in December. Fed Chair Jerome Powell on Wednesday reaffirmed his message of higher and potentially faster interest rate hikes.
"The decline in job openings does not indicate any meaningful improvement in the balance between labor demand and labor supply from the perspective of the Fed," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. "If one wanted to clutch at straws, one could point to the second consecutive decline in the quits rate."
Job openings, a measure of labor demand, decreased by 410,000 to 10.8 million on the last day of January. Data for December was revised higher to show 11.2 million job openings instead of the previously reported 11.0 million. Economists polled by Reuters had forecast 10.5 million job openings.
The report also showed job openings were higher than initially estimated in 2022, averaging 11.2 million, an increase of 1.2 million from 2021. The monthly decrease in openings was across all four regions, with big declines in the Midwest and the West, the epicenter of technology job cuts.
Labor market tightness was reinforced by the Fed's Beige Book, which described conditions as remaining "solid" in February and also noted "scattered reports of layoffs" and that "finding workers with desired skills or experience remained challenging."
Construction, the biggest casualty of the Fed's aggressive monetary policy tightening campaign, saw job openings plunging by a record 240,000. There were 204,000 fewer vacancies in accommodation and food services, while job openings fell by 100,000 in the finance and insurance industry.
Employment in the leisure and hospitality industry, which encompasses accommodation and foods services, remains below its pre-pandemic level. This sector has been the biggest driver of job growth. Vacancies also decreased in durable goods manufacturing, retail trade and state and local government.
But job openings increased in transportation, warehousing and utilities as well as nondurable goods manufacturing.
The job openings rate fell to a still-high 6.5% from 6.8% in December. It averaged 6.8% in 2022, up from 6.4% in 2021.
Hiring rose 121,000 to 6.4 million, lifting the hires rate to 4.1% from December's 4.0%. There were 77.2 million hires in 2022, a gain of 1.2 million from 2021. The hires rate averaged 4.2% in 2022, down from 4.3% in 2021.
Layoffs jumped 241,000 to 1.7 million, the highest level since December 2020, concentrated in the professional and business services industries. Layoffs, however, decreased in federal government. They increased sharply in the South, which has been experiencing an employment boom.
Layoffs rose 461,000 in 2022 to 17.6 million. The layoff rate rose to a still-low 1.1% from 1.0% in December. While the rate remains below its pre-pandemic high of 1.3%, the level of layoffs is now closer to the average of 1.9 million before the onset of the COVID-19 public health crisis.
"That suggests that the period of unprecedented job security for American workers is coming to a close," said Julia Pollak, chief economist at ZipRecruiter.
About 3.9 million people quit their jobs. That was the fewest since May 2021 and was down 207,000 from December. The decline was mostly in professional and business services, educational services and the federal government. A record 50.6 million people quit in 2022.
FEWER WORKERS QUITTING
Stocks on Wall Street were mixed. The dollar was steady against a basket of currencies. U.S. Treasury prices were mixed.
The quits rates, which is viewed as a measure of labor market confidence, fell to 2.5% from 2.6% in December, still above its pre-pandemic standards around 2.3%.
"The recent evolution of this measure, despite showing a decline this month, suggests that underlying wage pressure should remain elevated, even though pressures are easing somewhat," said Marc Giannoni, chief U.S. economist at Barclays in New York. "We continue to forecast that the pace of increase in payroll employment will show a resilient labor market."
Labor market strength was reinforced by the ADP National Employment report, which showed private employment increased by 242,000 jobs in February after rising 119,000 in January.
According to a Reuters survey of economists, the Labor Department's closely watched employment report on Friday is likely to show nonfarm payrolls increasing by 205,000 jobs in February after surging 517,000 in January. The unemployment rate is forecast unchanged at a more than 53-1/2-year low of 3.4%.
Data from Indeed showed job postings on the platform fell throughout February, which it said suggested there were 10.3 million openings at the end of last month.
"That would be another drop of about 500,000 openings," said Nick Bunker, head of economic research at Indeed Hiring Lab. "Yet openings would still be 47% higher than they were before the pandemic. The labor market is cooling, but it's still warm."
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