US job openings were lower on the last business day of May, closely-watched data out Wednesday showed. But at 11.3 million, the headline JOLTS print easily exceeded estimates.
April’s headline was revised markedly higher, to 11.7 million from 11.4 million.
At 6.489 million, hires were little changed. In fact, they fell to the lowest since January, leaving the “gap” near record wides (figure below).
Hires for April were revised lower. The figures suggested little, if any, progress on the road to normal.
The Fed is hoping to engineer enough downward momentum in the economy to compel employers to rethink hiring plans. In theory, record high job openings represent “free” job losses for a Fed that needs to cool the economy. An opening that ceases to exist because an employer decides the position doesn’t need to be filled doesn’t entail someone actually losing a job, but in the current conjuncture, it could have a similar effect vis-à-vis short circuiting the dreaded wage-price spiral.
That bit of wishful thinking is behind policymakers’ contention (explicit and implicit) that the Fed can bring down inflation without pushing the unemployment rate markedly higher. The June SEP found officials projecting a modest rise in the jobless rate to a still low 4.1% over two years as inflation recedes back near target (figure below).
Those forecasts were mercilessly lampooned by an army of commentators, one of whom was Bill Dudley.
Quits remained near record highs in May, according to Wednesday’s JOLTS data. 4.3 million Americans quit a job that month, leaving the quit rate parked close to an all-time high (figure below).
Technically, quits have fallen two straight months, but as you can plainly see from the visual, it’d be a ludicrous stretch to call that “progress.”
In the key leisure and hospitality industry, quits rose from April, driven by accommodation and food services.
Needless to say, layoffs and discharges loitered at record lows. Employers are desperate to hire. They can’t afford to fire workers and with wage growth running hot, they can scarcely afford to hire them either. That’s a truly vexing situation. For small businesses, it’s a veritable death knell.
Recall that wage growth for job switchers is far brisker than it is for so-called “stayers’ (figure below). That means the incentive for workers to exploit the current mismatch between demand for labor and the supply of it is very high.
This is a crucial dynamic to grasp. If the only way to ensure your wages keep pace with inflation is to opportunistically switch jobs, and the only way for employers to fill open positions when labor is scarce is to lure workers away from their current job, upward pressure on wages will persist.
That upward pressure is then passed along to consumers. And what are consumers? Workers who aren’t on the clock. When they punch back in, the might ask for another raise considering how much they paid for groceries on their day off. That’s the “spiral.” And it’s happening right now.
Bottom line: Wednesday’s data showed the US labor market remains a funhouse mirror characterized by a previously unimaginable disparity between job openings and workers willing to fill them, and pervasive “churn” as manifested in millions upon millions of “I quits.”
Again, how many of these are actually part time when you lift the lid? And how many of the others have been posted for many months, advertising jobs that have so many skills and experience requirements that they well know will never be filled? At least not at the compensation being offered.
Just curious now that JOLs has become the most important economic indicator.
Great point @derek — would be incredibly useful to see these sorts of breakdowns.
Service industry jobs are more susceptible to being automated than other types of jobs.
Where I am traveling, I see more and more automation when I dine out compared to the “norm” in the USA. Reducing just a few employees at a restaurant can be the difference between unprofitable and profitable.
Well put. A lot of white collar workers have been using the job switching to get higher wages for the last decade. I presume that recently the hourly wagers can more easily implement this strategy.
JOLTS data is from two months ago. I looked at some more timely data (one of the “high frequency” data services). Notable weakening in tech industry. In other industries, no discernible weakening but sometimes a flattening out (i.e. job market very tight but not getting any tighter). Consistent with anecdotals we discussed in a previous post. Worker mood (fear of job loss) worse in high income group (that’s tech industry effect) than in low. No improvement in labor participation.
I’ve said this before, but for all the economic negatives, in many ways the funhouse labor market is a huge positive.
People can get jobs, are paid better, have more job security, can unionize, can move up, and for the first time in ages that applies to the lowest income.
Investors worry about business’ wage costs and margin pressures, but that also contains good news for the formerly minimum wage worker whose hourly pay has increased 30%, older person who is getting hired despite being “old and slow”, young person who can get that first job and then get raises/promotions earlier than before.
Yes, inflation is making real wage growth negative at the moment, but wages are sticky while prices can decline. Having wages is better than not, -5% real wage growth is better than -100%, and the +100% real wage of getting employed is best of all.