Job openings rose in April to back over 10 million, raising concerns that the long-awaited slowdown in the labor market may not be occurring as expected, the Labor Department reported on Wednesday.
The number, 10.1 million, was well above estimates of 9.5 million and will be closely scrutinized as the Federal Reserve meets next month to decide on whether to halt its aggressive campaign to get inflation under control.
Job openings increased in retail by 209,000; while health care and social assistance saw a gain of 185,000; and transportation, warehousing and utilities jumped 154,000.
The increase suggests employers will still be having a hard time filling vacancies. Notably, the pace of layoffs slowed by 264,000 to an annual rate of 1.6 million.
“JOLTS rebound to 10.10 mil openings from 9.45mil last month. Much stronger than expected. Quits rate fell to 2.4% from 2.5%. Hiring rate holds steady at 3.9%. Indicates the job market is still healthy,” Kathy Jones, chief fixed income strategist, Schwab Center for Financial Research, tweeted after the release.
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While much of the rampant inflation of the past 18 months has been the result of first the prices of goods rising following the coronavirus and, more recently, the cost of services going up as people returned to their pre-pandemic habits, the Fed fears that continued strength in the labor market will increase the chances of wage inflation becoming entrenched.
Markets remain uncertain about what the central bank will do when it meets next month, with earlier expectations that it would pause any increases in interest rates having been scuttled after last week’s inflation measure came in high. Now, some are pricing in another quarter-point hike in rates, following on the May increase of a similar amount.
EY Chief Economist Gregory Daco said that Friday’s jobs report should confirm the trend of a slowing labor market, following the surprise 253,000 jobs added in April, and it will give the Fed some guidance over the path of interest rates.
“The May jobs report will take on heightened importance given the Fed’s extreme data-dependent approach and the growing divide among Fed policymakers over whether to pause their rate-hiking campaign in June,” he said.
“The job market continues to display resilience and durability, but evidence of softening conditions is mounting,” Daco added. “Job openings are falling, job creation has become less diffuse across industries, more companies are reducing their employees’ working hours, wage growth has begun to moderate, and layoffs are creeping higher.”
“Against this backdrop, the May jobs report should reveal a further slowdown in job growth, with nonfarm payrolls expected to rise around 180,000,” he said. “Such an outcome would imply a downshift in the three-month moving average of job gains below 200,000 to its slowest pace since January 2021.”
Even those with jobs are feeling the strain of inflation and higher interest rates – the medicine the Fed has chosen to tame rising prices but which has driven mortgage rates to double the level of a year ago.
Coupled with house prices that remain elevated, the higher cost of borrowing has made it difficult for first-time buyers to afford a home. A recent study from credit-rating firm Experian found that nearly 70% of Gen Z and millennial consumers believe the current economy is hurting their ability to be financially independent adults. More than a quarter of them don’t feel optimistic about their current financial situation, according to Experian.
“Our research shows many young consumers feel the current economic environment is hurting their ability to be financially independent adults,” said Rod Griffin, Experian’s senior director of public education and advocacy. “Recent economic news and layoffs have most of these consumers more focused on their financial health, which is a good thing. However, many of these consumers are striving to be more financially literate.”