Job openings fell in February to the lowest in nearly two years as the labor market trends towards the “better balance” Federal Reserve officials, including chair Jerome Powell, have been seeking.
The latest Job Openings and Labor Turnover Survey, or JOLTS report, released Tuesday showed there were 9.9 million jobs open at the end of the month, down from 10.6 million in January and 11.6 million in the same month last year.
Job openings peaked at over 12 million in March 2022; since that peak, the U.S. economy has added 10.25 million new jobs.
This slowdown in the number of open positions also suggests the labor market is trending toward an equilibrium between supply and demand the Fed has seen as pushing wages and inflation higher in recent years.
“The labor force participation rate has edged up in recent months, and wage growth has shown some signs of easing,” Powell said in a press conference last month.
“However, with job vacancies still very high, labor demand substantially exceeds the supply of available workers. FOMC participants expect supply and demand conditions in the labor market to come into better balance over time, easing upward pressures on wages and prices.”
The Fed has raised rates from a range of 0%-0.25% at the beginning of 2022 to a target range of 4.75%-5% today, the highest level since 2007.
Progress on bringing down the number of open roles in the economy, however, is in the eyes of some economists just that: progress.
“While the Fed will welcome the softening in the data, officials will put much more stock in Friday’s employment report and will continue to raise rates at the coming meetings to ensure further progress is made toward softer labor market conditions and lower inflation,” Matthew Martin, U.S. economist at Oxford Economics, wrote in a note to clients on Tuesday.
Economists expect Friday’s jobs report will show 240,000 jobs created last month, according to data from Bloomberg. Over the last six months, job gains have averaged 343,000 per month.
This decline in open roles also comes as some private sector reports suggest a chunk of open roles are for jobs that don’t exist in practice. Last month, The Wall Street Journal, citing data from Clarify Capital, reported that a third of hiring managers said open roles stayed up as a signal to existing employees that help was on the way.
But the “softening” in the labor market that Powell and others hope to achieve by raising interest rates will need to be considerable given the heights the labor market has reached in the years since the pandemic.
To bring job openings down to levels that served as records pre-pandemic, for instance, another 3 million open roles would need to be cut from the economy.
“Openings remain noticeably above the highs of prior cycles,” wrote Wells Fargo economists in a note to clients on Tuesday. “At the same time, and despite the steady drumbeat of layoff announcements in recent months, businesses still seem fairly keen to hold onto workers. The layoff and discharge rate dipped back to 1% in February, compared to an average of 1.2% over 2018-2019.”
Look at announcements from the tech sector, signals from the bond market, and fears emanating from the banking world, and recession risks seem omnipresent. Survey-based data also suggests a rising disenchantment with the economy from both consumers and businesses.
“Reducing inflation is likely to require a period of below-trend growth and some softening in labor market conditions,” Powell said. “Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run.”
But the hard data collected by government agencies in the same manner, month after month, shows an economy that continues to be resilient.
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