US job openings fell in April, closely-watched data out Wednesday showed.
Unfortunately, at 11.4 million, the headline JOLTS print was still higher than consensus expected, underscoring ongoing labor shortages and pervasive distortions in the jobs market.
Hires fell to 6.59 million, leaving the gap near record wides (figure below). For context, the number of openings on the last business day of April 2021 was 9.27 million, and hires 6.12 million.
Openings on the last business day of March were far higher than initially reported, and hires for that month lower.
The quits rate was unchanged. Another 4.4 million Americans quit a job in April. That wasn’t quite a record, but it was close. Every month is basically a record (figure below).
In leisure and hospitality, where the quits rate is the highest, 813,000 people left a position of their own accord. April marked the fifth consecutive month that more than 800,000 people voluntarily separated themselves from a leisure and hospitality job.
In the simplest terms: There’s no sign of progress whatsoever.
Competition for labor remains intense, and that means paying up to acquire and, crucially, to retain, scarce workers.
A testament to that was a new record low for layoffs and discharges, which fell by 170,000 (figure below).
For what it’s worth (which is a lot if you’re asking for a raise), the pre-pandemic average for layoffs and discharges was around 1.9 million. April’s print was 1.246 million.
Jerome Powell is hyper-focused on the ratio of job openings to Americans counted as unemployed. With the upward revision to March’s headline JOLTS print, that ratio hit 1.9918 before receding slightly to 1.92 for April (figure below).
I’ve been over this ad nauseam, but it’s an absolutely essential dynamic to grasp. The Fed needs to reduce job openings while avoiding a large increase in the unemployment rate.
Put differently, the Fed’s task is to create just enough drag to squeeze out superfluous job openings while avoiding any actual job losses. As Goldman’s Jan Hatzius put it, “The key to a soft landing is to generate a slowdown large enough to persuade firms to shelve some of their expansion plans, but not large enough to trigger sharp cuts in current output and employment.”
Read more: ‘Necessary’ Slowdown Doesn’t Mean Massive Job Losses, Goldman Says
Bottom line: There’s no concrete evidence that the Fed’s efforts thus far have slowed hiring intentions. Management commentary from Q1 earnings calls suggested some companies are now coming to terms with their own overcapacity problems, so it’s entirely possible that an inflection point is imminent. But there’s a long way to go to close the gap.
Until the labor market is more balanced, wage growth will continue to run hot, risking a wage-price spiral. The tragic irony for workers is that labor’s newfound leverage is contributing to higher prices for the goods and services they consume when they’re not working.
Everyday Americans are simultaneously experiencing the most rapid wage gains they’ve ever seen and the quickest loss of purchasing power in a generation. Insult to injury is that the latter is a direct consequence of the former.
H-man, I have to disagree. I still cant grasp the mathematics of production-labor wage increases (meaning productive members of society who actually produce goods and services while at work – not c-suite do nothings and others of their ilk) are responsible for the cumulative effects of economic inflation. Im not going to cite Wages Price and Profit for a counter-example but will give you a real world example.
I helped negotiate a labor contract for a large employer once. We were asking for a 10% raise over the life of the deal. The company showed us blue collar stiffs on the committee all these numbers pulled out of thin air. Of course these were not quarterly reports; they were projections and sorts. I think they wanted to inundate us with data to prevent logical reasoning, something I suspect most “economists” and “red blooded capitalists” enjoy as a hobby.
The claim was that our labor “ask” would price them out of their dominant market position because the price they would have to pass on to their customers. I guess nobody else at the bargaining table, including the company president, could do any math because it was a simple back of the envelope calculation to prove the theory wrong.
In this case; direct labor costs of our unit accounted for about 22-26% of total cumulative billed production rates. The “economists” claimed that our 10% wage increase would translate into a 10% price increase for their customers (top-tier corporations, mostly SP500 etc). A quick add-up proved it to be a mere 2.2-2.6% price increase.
When presented with these figures, management tucked in their tails and signed a deal within weeks, even adding vacation weeks for senior low skill workers. The company went on to absorb other competitors and gain market share in a once-lucrative domestic production market.
The primary driver of price increases is the supply-side disruptions from the frantic and chaotic decoupling of globalization. Whether it was the cutoff of migrant labor (especially acute in leisure and hospitality – did any of you ever ask which country your resort employees were from or what they had to do to get a summer job in the US?), the dumping of Chinese paper and shutdown of a significant – maybe 50%- of our country’s paper production supply chain, microchips, oil, baby formula, toner, etc… everyone is bracing for impact. The problem is not productive overcapacity, it is the allocation of critical industry into fewer and fewer bloody greedy hands who can never be satisfied with their take and will always sell to the highest bidder; even if it were their own soul’s fate to the devil himself.
I wish someone would blame CEO and Wall Street pay inflation for some of society’s ills, and recommend they take a haircut once in a while, instead of the hard working people who make our modern lives leisurely due to their labors.
I agree that the price of Labor is rarely the “big reason” that businesses fail; if that were true wouldn’t all the Tech companies go out of business due to their expensive employees?
This inflation is clearly caused by too little supply/flow of goods, still bollixed by Covid, and increasingly by energy/oil being up about 40%.
So the Fed convincing companies to not hire won’t change the Supply nor Energy shortages, and I can’t see how Demand changes if there’s still the same number of people (regardless of them being prevented from getting a 10% raise by job hopping)… unless the idea is that every person in the US consume 40% less?