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US job openings unexpectedly rise, but resignations decreasing

Published 01/30/2024, 10:18 AM
Updated 01/30/2024, 01:51 PM
© Reuters. FILE PHOTO: An employee hiring sign is seen in a window of a business in Arlington, Virginia, U.S., April 7, 2023. REUTERS/Elizabeth Frantz/File Photo
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. job openings unexpectedly increased in December and data for the prior month was revised higher, suggesting that the labor market likely remains too strong for the Federal Reserve to start cutting interest rates in the first quarter.

Nevertheless, the labor market is gradually cooling, with the report from the Labor 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 labor market through consumer spending. Financial markets have lowered the odds of a rate cut in March to well below 50%.

"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 labor demand, were up 101,000 to 9.026 million on the last day of December, the Labor Department's Bureau of Labor Statistics said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report.

Data for November was 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 labor 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%-5.50% 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, healthcare 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%.

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 healthcare and social assistance hiring declined 119,000.

The hires rate rose to 3.6% from 3.5% 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 (NYSE:UPS) 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% for a fourth straight month as most companies hoard workers following difficulties finding labor 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.

CONSUMERS UPBEAT

Resignations fell 132,000 to 3.392 million in December, the lowest level since January 2021. The fourth straight monthly decline was led by healthcare and social assistance, where quits decreased 71,000. The quits rate, viewed as a measure of labor market confidence, was unchanged at 2.2%.

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 (LON:NXGN) in New York.

Labor 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 $125,000 and more, where a marginal decline was recorded.

Consumers' inflation expectations over the next 12 months dropped to 5.2%, the lowest reading since March 2020, from 5.5% in December. Perceptions of a recession this year eased further.

The survey's so-called labor 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 Labor Department's monthly employment report.

The government is expected to report on Friday that nonfarm 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% from 3.7% 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.

© Reuters. FILE PHOTO: An employee hiring sign is seen in a window of a business in Arlington, Virginia, U.S., April 7, 2023. REUTERS/Elizabeth Frantz/File Photo

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.

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