Job vacancies across the world’s largest economy rose above nine million for the first time since September, the first of this week’s key US labor market data showed.
The 9.026 million openings on the last business day of December exceeded every estimate from economists. Consensus expected a drop to 8.75 million.
The prior month’s reading was revised higher to show an increase from October to November, which means December’s jump counted as the second consecutive.
Suffice to say the JOLTS headline has stopped cooperating with the “immaculate disinflation” narrative, at least temporarily.
This isn’t a disaster by any stretch, but it’s unwelcome at the margins. The Fed wants more in the way of normalization from the headline JOLTS prints. Many of these job openings can be rendered superfluous by stricter monetary policy, the story goes.
Why would the Fed want to render open jobs superfluous? Well, because too many open jobs are indicative of too much demand, and too much demand is inflationary. If employers are competing for scarce workers, they’ll have to pay up for whatever labor’s available, that’s conducive to hot wage growth and, according to the narrative, inflation.
That’s the context for the JOLTS surprise, which won’t be welcomed by markets, even if it’ll be quickly eclipsed in the minds of traders by a deluge of more important data, earnings and inputs.
On the bright side, the quit rate stuck at 2.2%, the lowest since September of 2020.
Total quits fell again to 3.392 million, the fewest in three years.
That’s means less churn and in my estimation anyway, it should help mitigate the headline vacancies overshoot.
Tuesday’s update translates to an openings/unemployed ratio of 1.44, the highest since September.
That’s the metric for “immaculate disinflation,” although it hasn’t grabbed as many headlines lately with the realized inflation readings trending back towards target (or below target on a six-month annualized basis).
All in all, the JOLTS release showed the US labor market remains strong and, importantly, may suggest the Fed can’t count on additional big declines in job openings with no attendant increase in the unemployment rate. That is: The historical macro anomaly at the heart of the divine disinflation narrative might’ve done all the work it can do.
Again, this update will be forgotten by Friday (and maybe even by tomorrow) depending on how earnings, the Treasury refunding details, Jerome Powell’s press conference, ADP and the jobs report play out. Given that, I won’t spend additional time editorializing around the report.
