Job openings fell in January yet still came in hotter than expected, offering the Federal Reserve no relief in its fight against inflation.
The central bank faces a crucial decision when it meets in two weeks: Whether to maintain its current peak policy rate of 5.5%, as it had announced a few months ago, or to take more drastic measures given recent data indicating a strong economy.
January’s job openings—a proxy for labor demand—fell to 10.8 million from an upwardly revised 11.2 million in December, according to data released by the Bureau of Labor Statistics on Wednesday.
That was equivalent to 1.9 openings available for each unemployed worker, near a record high. The pre-pandemic average in 2019 was only 1.2.
The significant mismatch between labor demand and supply, while having shown some signs of improvement, continued to suggest an unsustainable imbalance that will most likely push the Fed to go further in its efforts to cool the economy.
From now to the Fed’s next meeting on March 21 and 22, new data from February’s jobs report and Consumer Price Index will keep the market on edge.
Everything seems to be on the table, including accelerating the pace of rate hikes with a 50 basis-point increase and even perhaps a 6% peak policy rate.
Underneath Wednesday’s top-line number, layoffs rose sharply in January to 1.7 million from 1.5 million in December. The series has been on an upward trend since the middle of last year, staying consistent with anecdotal evidence of widespread layoffs in sectors like tech and housing.
Expecting a potential economic downturn, the quit rate continued to fall to 2.5% in January as workers, facing more uncertainty, were less eager to switch jobs.
That decline, however, did not keep companies from hiring more. Job hires rose to 6.4 million from 6.3 million in December, offsetting the increase in layoffs, suggesting that laid-off workers might have been able to find new jobs relatively easily.
