US job openings rose to more than 11 million on the final business day of December, hotly anticipated data released on Wednesday showed.
It was a bitter disappointment for those hoping to see additional evidence of labor market normalization. Economists expected openings to fall by nearly 150,000. Instead, they rose by almost 600,000.
Hires rose too, but the increase was comparatively small. The gap thus ballooned wider.
I wouldn’t want to overdramatize the print, but suffice to say it wasn’t what the Fed or markets wanted to see. Not at all.
The likes of Larry Summers have variously insisted it’s a bad idea to base a soft landing thesis on the assumption that openings will normalize rapidly. Christopher Waller has pushed back, but these are the kinds of data points which argue against the Fed’s position.
The surge in openings suggests that either labor is getting more scarce, that the workers who are available aren’t a good fit for open positions or some combination of both. The month-to-month increase in December was the largest since July of 2021.
Remember: The soft landing story leans very heavily on the idea that millions of job openings can be rendered superfluous by the Fed’s efforts to slow demand. In such a scenario, wage growth and inflation could moderate without too many Americans having to actually lose a job.
Prints like Wednesday’s headline JOLTS number cast serious doubt on that benign narrative. Openings in leisure and hospitality jumped by 430,000.
Churn was unrelenting. 4.1 million Americans quit a job in December, the data showed. The quit rate remained stuck at 2.7%.
Although layoffs were the highest since August, they remained parked near historically low levels. If you can’t find enough people to hire, you’re unlikely to fire anyone.
The figures were almost sure to come up in Jerome Powell’s press conference on Wednesday. Powell watches the ratio of job openings to those counted as officially unemployed closely. With Wednesday’s JOLTS headline, that ratio rose to a six-month high.
“There clearly remained an impressive need for workers to conclude 2022,” BMO’s Ben Jeffery remarked. “For a Fed that is pursuing softer wage gains in order to bring inflation down, a shortage of employees to fill job openings does not bode well for cooling worker compensation,” he added.
That pretty much summed it up. In this week’s data preview, I wrote that it was “possible market participants and economists will come away with the impression that a wage-price spiral was successfully averted, but that’d require a clean sweep across ECI, JOLTS and the AHE prints.”
The Fed did get a cooler-than-expected ECI headline. But the JOLTS number was unequivocally concerning.
I see that some observers say more timely employment data suggested continued easing, vs the lagged JOLTS, and/or pointing to the weather. But the Fed governors are primary actors with grave responsibility, not observers, and their ability to rely on tea leaves is commensurately lower.
“But the Fed governors are primary actors with grave responsibility, not observers, and their ability to rely on tea leaves is commensurately lower.”
If this blog allowed for responding with giant thumbs up or smiley emojis, I’d have been clicking away after reading that.
To me, a soft landing means that inflation is brought back to an acceptable level without too many people losing their jobs. This data suggests that the landing has been pushed out some more but I don’t think it indicates whether it will eventually be hard or soft. What am I missing?