On March 4, the U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) reported that there were nearly 9.9 million job openings in February. This is a reduction from January’s downwardly revised 10.6 million openings.
The JOLTS report showed that the so-called quits rate, which measures voluntary job leavers, edged up 2.6%. Job openings exceeded the number of unemployed people seeking work by 5.9 million.
The labor market is beginning to soften. The U.S. added 236,000 workers in March, and the unemployment rate ticked up to 3.5% from 3.4%, the lowest since 1969.
Federal Reserve Chairman Jerome Powell opined in February that the imbalance between job openings and available workers are a key driver of inflation, as strong demand can drive up wages. Powell said in an August 2022 speech at Jackson Hole: “In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all.”
Nick Bunker, director North American Economic Research, said, “The mismatch between the skill sets of job seekers and those needed by employers could be exacerbating the imbalance in the labor market.”
February’s figures predate the banking industry turmoil that occurred in March.
The Federal Reserve has raised the federal funds rate by nearly five percentage points over the past year in order to lessen red-hot inflation. Their goal is to reduce the purchasing power of everyday Americans without sparking a recession.
Mark Hamrick, senior economic analyst with Bankrate, told CNN, “The job market peaked earlier in the year. Some of the steam is starting to come out of the job market, and we will likely see that both in the hiring slowdown and probably a slower increase in the unemployment rate in the coming months.” During the past two months, openings have decreased by 1.3 million.
The Commerce Department reported that new orders for manufactured goods fell to a seasonally adjusted .7% in February from the previous month. The March survey of purchasing managers by the Institute for Supply Management reported the fifth straight month of contraction in the U.S. manufacturing sector. Housing, manufacturing and the technology sector have also shown some slowing in response to the Fed’s tightening.
Employers that hired aggressively earlier in the pandemic in industries such as transportation, warehousing, finance and the tech-heavy information sector cut employees in February. Jobs are increasingly going to in-house applicants as companies face uncertain growth prospects.
The largest decrease in job openings were in professional and business services, health care, transportation, warehousing and utilities.
Chris Rupkey, chief economist at FWD Bonds, wrote, “Over a million fewer employment opportunities for American workers in just the first couple of months this year is evidence the strongest labor market since the 1960s is starting to show a few cracks. Payroll employment is set to slow in the months ahead, which should help keep inflation pressures in check.”
Rupkey continued, “The February JOLTS report showed that the number of new hires decreased to 6.1 million from 6.3 million, layoffs fell to 1.5 million from 1.7 million, and quits grew to 4 million from 3.9 million.”
Until recently the job market had been very strong during a period when the Federal Reserve has been engaged in an effort to bring down inflation through a series of interest rate hikes. While Fed officials have repeatedly said that they are not seeing substantial evidence of a wage-price spiral, they are trying to dampen demand for workers though higher interest rates. Rupkey said, “This sets up a dangerous situation where tighter credit conditions could prompt actual layoffs in the months ahead as corporations struggle to get costs under control.”
Originally published in the Sarasota Herald-Tribune
