US job openings Retreat In February

US job openings inched lower last month to retreat only modestly from a record high, and vacancies still far outpaced new hires as employers struggled to bring back more sidelined workers.

Though vacancies decreased in the latest survey, the data have been volatile and have yet to show a sustainable trend lower. Openings hit a high of 11.4 million in December — which marked a record in data going back to 2001. And the discrepancy between new hires and job openings has also remained wide, with hires rising by 263,000 to reach 6.7 million in February.

Job openings totaled 11.266 million in February, the Labour Department said in its Job Openings and Labour Turnover Summary (JOLTS) on Tuesday. This comes after job openings came in at 11.283 million in January, according to the Labour Department’s revised figure. Consensus economists were looking for 11.000 million job openings last month, according to Bloomberg data.

Quits, or voluntary departures, have also remained elevated. These were little changed at 4.4 million in February. And the quits rate — a proxy for worker leverage, with a higher figure signaling workers’ confidence in finding another job after leaving their current one — rose by 0.1 percentage points to 2.9% in February. That was still well above the 2.3% average throughout 2019.

Some of the largest increases in job openings were in the arts and entertainment industries, where vacancies rose by 32,000. Education services and federal government job openings each also increased by more than 20,000 last month. Hires, meanwhile, were seen notably in construction with an increase of 75,000.

Labour scarcities have been one of the key supply-side concerns impacting the US economy and have contributed to inflationary pressures as employers raise wages to compete for the available pool of talent. And in many cases, even higher compensation has not incentivized workers to return en masse. According to a study from McKinsey earlier this month, of nearly 600 workers surveyed who voluntarily left their roles without another job planned, 44% said they had “little to no interest” in rejoining the traditional labour force within six months.

Current labour market conditions have, in turn, informed the Federal Reserve’s resolve to focus primarily on its price stability mandate — in this case, bringing down inflation — instead of positioning monetary policy to maximize employment in an already tight labour market.
By many measures, the labour market is extremely tight, significantly tighter than the very strong job market just before the pandemic,” Powell said in public remarks last week. “There are far more job openings going unfilled today than before the pandemic, despite today’s unemployment rate being higher.”

Powell also acknowledged, however, that the Fed’s monetary policy tools like interest rate hikes could not improve labour supplies in the near-term. However, these would instead work to moderate demand growth, “thereby facilitating continued, sustainable increases in employment and wages,” he said.

Meanwhile, other economists suggested that labour supply and demand imbalances are likely to improve to a degree on their own in time, as pandemic-era factors continue to unwind.

Labour shortages that have contributed to gains in wages are likely to diminish at the margin on a better health backdrop and some normalization of caregiving activities. Employment in child day care has increased over the past six months, and employment in nursing and residential care facilities has increased over the past three. Even so, levels are still well below where they were prior to the pandemic.

Other new economic data later this week are expected to further reaffirm that gradual improvements in employment have been taking place this year, even as the labour market remains hot compared to pre-pandemic standards.

On Friday, the Labour Department will release its latest monthly jobs report for March, offering some of the most closely watched metrics of the labour market’s strength. Consensus economists expect the report to show nearly half a million non-farm payrolls returned in March as the unemployment rate improved by 0.1 percentage points to 3.7% — a new pandemic-era low.