A now hiring sign in Somerville, Mass., on Sept. 1, 2022.BRIAN SNYDER/Reuters
U.S. job openings unexpectedly increased in December and data for the prior month were revised higher, suggesting that the labour market likely remains too strong for the Federal Reserve to start cutting interest rates in the first quarter.
Nevertheless, the labour market is gradually cooling, with the report from the Labour Department on Tuesday also showing Americans staying put at their current jobs, which could help to slow wage growth. The number of people quitting their jobs, likely in part for greener pastures, was the lowest in nearly three years.
There were 1.44 positions for every unemployed person, steady from November, but down from two jobs in March, 2022, when the U.S. central bank started hiking rates.
Fed officials are expected to keep rates unchanged at the end of a two-day policy meeting on Wednesday against the backdrop of a resilient economy, which is being anchored by the labour market through consumer spending. Financial markets have lowered the odds of a rate cut in March to well below 50 per cent.
“Persistent demand for workers, while positive for continued economic growth, may throw a wrench into efforts to cool inflation early in 2024,” said Ben Ayers, senior economist at Nationwide in Ohio. “This is again a sign of too much of a good thing, which should lead to a later-than-hoped shift to monetary policy easing.”
Job openings, a measure of labour demand, were up 101,000 to 9.026 million on the last day of December, the Labour Department’s Bureau of Labor Statistics said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report.
Data for November were revised higher to show 8.925 million unfilled positions instead of the previously reported 8.79 million. Economists polled by Reuters had forecast 8.75 million job openings in November.
Job openings peaked at a record 12.0 million in March, 2022. Demand for labour has remained fairly healthy despite tighter monetary policy. Since March, 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25-per-cent to 5.50-per-cent range.
There were an additional 239,000 job openings in the professional and business services sector in December.
The were also notable increases in manufacturing, retail trade, health care and social assistance as well as financial activities sectors. Unfilled jobs, however, decreased by 121,000 in the accommodation and food services industry and fell 83,000 in the wholesale trade sector.
Jobs were abundant in the South, but there were fewer opportunities available in the Midwest. The Northeast saw a modest increase in vacancies, while the West reported a mild drop. The job openings rate was unchanged at 5.4 per cent.
Hiring rose 67,000 to 5.621 million, lifted by professional and business services, accommodation and food services as well as state and local government. But health care and social assistance hiring declined 119,000.
The hires rate rose to 3.6 per cent from 3.5 per cent in November. Layoffs increased 85,000 to a still-low 1.616 million, driven by job losses in transportation, warehousing and utilities, which enjoyed a boom in business during the COVID-19 pandemic.
United Parcel Service said on Tuesday it planned to cut 12,000 jobs. Professional and business services sectors also shed workers in December.
The layoffs rate was unchanged at 1.0 per cent for a fourth straight month as most companies hoard workers following difficulties finding labour in the aftermath of the pandemic.
Stock on Wall Street were little changed. The dollar slipped against a basket of currencies. U.S. Treasury prices were mixed.
Resignations fell 132,000 to 3.392 million in December, the lowest level since January, 2021. The fourth straight monthly decline was led by health care and social assistance, where quits decreased 71,000. The quits rate, viewed as a measure of labour market confidence, was unchanged at 2.2 per cent.
The relatively low quits rate bodes well for slower wage inflation and price pressures in the economy.
“That is a positive sign for the Fed, as employee turnover affects the pace of wage growth,” said Lou Crandall, chief economist at Wrightson ICAP in New York.
Labour market strength, subsiding inflation and expectations of a rate cut helped to boost consumer confidence in January.
The Conference Board said in a separate report on Tuesday that its consumer confidence index rose to 114.8 this month, the highest reading since December, 2021, from 108.0 in December.
The rise in confidence was across all age groups, with bigger gains reported for consumers 55 years and over. Confidence improved for all income groups, with the exception of households with annual incomes of US$125,000 and more, where a marginal decline was recorded.
Consumers’ inflation expectations over the next 12 months dropped to 5.2 per cent, the lowest reading since March, 2020, from 5.5 per cent in December. Perceptions of a recession this year eased further.
The survey’s so-called labour market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, widened to 35.7 this month from 27.3 in December. This measure correlates to the unemployment rate in the Labour Department’s monthly employment report.
The government is expected to report on Friday that non-farm payrolls increased by 180,000 jobs in January, according to a Reuters survey of economists. The economy added 216,000 positions in December. The unemployment rate is forecast to rise to 3.8 per cent from 3.7 per cent in December.
Despite the rise in confidence, consumers were less enthusiastic about making big-ticket purchases over the next six months. There is, however, no strong correlation between confidence and consumer spending.
Other data on Tuesday showed solid house price growth in November amid a chronic shortage of properties for sale.
“It will be challenging to push for earlier rate cuts in this environment,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.