Job openings came in hotter than expected in September, suggesting that the imbalance in the labor market will take longer to resolve than originally anticipated.
There were 1.9 job vacancies for each unemployed worker, near a record high.
There were 1.9 job vacancies for each unemployed worker, near a record high, according to data from the Labor Department released Tuesday. Job openings rose to 10.7 million in September, up from a revised 10.3 million in August and about 3 million higher than the pre-pandemic average.
Openings are a proxy for labor demand and have been one of the Federal Reserve’s most closely watched data series as it tries to cool demand and tame inflation.
The upside surprise provided the Fed no comfort ahead of its highly anticipated meeting on Wednesday. Another 75-basis-point increase in its policy rate is highly likely, and such a strong number for labor demand will most likely make its way into remarks by Federal Reserve Chairman Jerome Powell after the meeting.
The increase came mostly from the leisure and hospitality sector, which added 215,000 open positions, with education and health services both adding more than 200,000 vacancies. The quit rate was unchanged at 2.7% as the market remained an employees’ market. Layoffs fell on the month.
In a separate report, the Institute for Supply Management’s manufacturing index continued to expand, though at the slowest pace since May 2020. The index was 50.2% in October, slightly higher than forecast at 50% and inching closer to contraction territory, which is below 48.7%.
The slowdown in October was driven mostly by the drop in the prices paid component, which contracted for the first time since May 2020. That component has fallen by almost 50% from its recent high of 87.1 in March to 46.6 in October. Unlike the data on labor demand, manufacturing goods prices should be a lot more encouraging for the Fed as it battles inflation.
Still, the continuing drop in manufacturing goods prices was well within expectations as spending on goods has shifted significantly to services. We will get a better picture of inflation in October with the release of data on service prices on Thursday.
New orders for manufacturing goods continued to decline, but at a slower pace in October while employment came in neutral on the month.
The job openings data showed that the impact of the Fed’s campaign to restore price stability on the manufacturing sector has yet to take full effect on the labor market. Still, the risk of a Fed-driven recession is rising as the central bank continues to target the tight labor market.