Job openings edged higher in February, suggesting that the jobs report for March will show continued strong gains when it is released on Friday.
Openings rose by 8,000 to 8.756 million in September, slightly higher than forecasted, according to data from the Bureau of Labor Statistics released on Tuesday. Demand for labor remains above the pre-pandemic level, a reason to expect the labor market to stay healthy in the first half of the year.
At the same time, the data did not seem to add more pressure on wage growth if one looks at the quit rate, a better indicator for labor market tightness in our view. The quit rate stayed at 2.2%, lower than the 2019 level.
On top of that, most job vacancies were concentrated in smaller firms with fewer than 50 employees, where openings were above the pre-pandemic level. Those vacancies contributed to more than 40% of total job openings.
Looking at the data through a longer lens, since 2010, job openings have been below trend for a couple of months now. That might mean the labor market is much closer to normalization than anticipated. The openings-to-unemployed ratio dropped to 1.36, coming closer to the pre-pandemic level of 1.2.
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That normalization adds to the reasons why we think the Federal Reserve should cut its policy rate this June and follow up with two more cuts this year to avoid the downward risks to economic growth and an unemployment rate that would be higher than necessary.
