U.S. job openings fell by 3.8% to 11.4 million in April amid economic moderation and monetary policy tightening, according to Bureau of Labor Statistics data released on Wednesday.
Still, job openings remained near a record high, which puts more pressure on wages and inflation, and adds to the challenge for the Federal Reserve as it tries to cool an overheating economy.
We do not expect the Fed to move away from its plan to raise rates by 50 basis points at each of its next two meetings. Strong data on job openings, however, won’t help to make the case for a potential pause in September.
Even if labor demand continues to decline, the current pace won’t suffice in order to tame inflation through the end of the year. It is no secret that the Fed has aimed to aggressively slow down labor demand and economic activities to quash inflation.
The Fed has been watching job openings closely as an important factor in its decision to raise interest rates this year. Fed Chairman Jerome Powell referred in a recent speech to the number of job openings per unemployed workers as an indicator of an unhealthy job market.
In April, there were 1.92 job openings for every unemployed worker, following an upwardly revised 1.99 in March.
Robust demand for labor continued to provide workers more incentives to quit for a new job. The quit rate in April stayed elevated at 2.9%, near the record high 3.0% in December.
The hiring rate also stayed significantly above the pre-pandemic level at 4.4% in April. The average in 2019 was about 3.9%. Quit and hire rates increased across all firm sizes except for medium-size firms with 50 to 249 employees.
Never before has the job openings report from the Bureau of Labor Statistics become so important to policymakers. While the Fed is trying to front load rate hikes with multiple 50-basis-point increases, it often takes time for these hikes to make their way into the economy.
Reports of hiring freezes and reduced earnings guidance from several companies in the past two months might, however, be an encouraging sign for the Fed in its fight against inflation.