US job openings once again frustrated economists expecting evidence of labor market normalization.
There were 9.553 million open positions on the last business day of September, key data released on Wednesday showed. Consensus was 9.4 million.
The prior month’s headline JOLTS print was revised lower to 9.497 million. The gap with hires rose.
The second consecutive monthly increase, small though it was, underscored the notion that the path back to normal is long and winding given lingering distortions and what still feels like severely impaired matching efficiency. Openings in leisure and hospitality (which is to say in accommodation and food services) rose 200,000.
Demand for labor is a proxy for overall demand in the economy — if businesses are hiring, consumers are still spending. If consumers are still spending, it’ll be difficult to dislodge inflation, particularly in the services sector. The abundance of open positions is thus inflationary to the extent it’s indicative of still elevated demand.
In addition, employers who can’t fill open positions will be inclined (compelled, even) to offer higher wages to entice scarce workers. That raises the risk of a wage-price spiral. Everyone knows the narrative by now.
The rate of layoffs and discharges fell in September, Wednesday’s data showed. Quits were little changed at just under 3.7 million.
Note that after falling to the lowest since February of 2021, progress towards normal (with respect to both the level and rate of quits) has stalled.
As ever, you’re reminded that job openings hold the key to the “immaculate disinflation” narrative. As I put it in this week’s macro preview, America’s 9.6 million job openings are to labor market normalization what the Fed’s bloated RRP facility was to Treasury’s cash rebuild: Just as the market needed RRP balances to absorb bill issuance in order to avoid reserve drain, the economy needs job openings to “absorb” labor market normalization to avoid layoffs.
Meanwhile, ADP said private sector employers added 113,000 jobs in October. That was fewer than the 150,000 consensus expected, but still better than September.
As a reminder ahead of Friday: Using ADP to make predictions about the government’s monthly jobs report is a fool’s errand.
Frankly, it’d be nice if Friday’s jobs report did mirror the ADP figures, which painted a very balanced picture. Hiring was broad-based but not so voracious as to call into question the inflation fight, and job additions were spread across firm sizes.
Pay growth was robust but the trend towards a more sustainable pace was intact. Pay growth for job stayers was 5.7% in October, down slightly from September and the coolest since September of 2021.
The pace of pay gains for job “changers” was 8.4%, the slowest since June of 2021. The gap between the two (conceptually the reward for quitting) narrowed to 2.7ppt. It was nearly 9ppt in April of 2021, when inflation took off in earnest across the US economy.
“No single industry dominated hiring this month, and big post-pandemic pay increases seem to be behind us,” ADP chief economist Nela Richardson said Wednesday. “In all, October’s numbers paint a well-rounded jobs picture and while the labor market has slowed, it’s still enough to support strong consumer spending.”
Summing up, the JOLTS figures were frustrating, and the ADP report was encouraging. As ever, these figures will be overshadowed by NFP on Friday, but I’d caution against dismissing the job openings data. There are still too many vacancies and too much churn for comfort, particularly in the context of the Q3 ECI report, which served as another reminder that the cost of labor and worker retention remains elevated.
