U.S. job openings in February came in blazing hot again at 11.3 million, which translated to 1.8 jobs available per unemployed worker, the Bureau of Labor Statistics reported on Tuesday.
The new data will add more pressure on the Federal Reserve to raise interest rates and cool the economy, and investors are increasingly pricing in a 50 basis-point rate hike in the next Fed meeting in May.
The Fed has been watching the number of job openings closely as an important factor in its decision to raise interest rates this year. Chairman Jerome Powell referred in a recent speech to the number of job openings per unemployed worker as an indicator of an “unhealthy” job market.
Interest rate hikes can only help to reduce labor demand while hurting labor supply, which we believe needs much more attention.
But it has been clear that the priority of the Federal Reserve at the moment is to tame inflation, which Powell said is the necessary condition for any other economic activities.
Hiring and quit rate
After a temporary slowdown in January because of the omicron surge, hiring picked up again in February with 263,000 more job hires. The hiring rate as a result ticked up to 4.4 on the month from 4.3 previously.
The rate of workers quitting their jobs also ticked up to 2.9 from 2.8 in January. Most of the increase concentrated in quits from medium to large firms with 50 or more employees.
This marked the ninth month in a row that the quit rate was 2.8 or above as businesses have struggled to retain their workers. In response, many have been raising wages. But that can do only so much if there is a low number of applicants to begin with, as most businesses in sectors like manufacturing and hospitality are saying.
Businesses are then left casting a wider net to attract workers. Instead of competing with firms in the same industry sector, businesses are now competing against firms outside of their sector as workers have had time to reassess their career paths during the pandemic.
The takeaway
With multiple rate hikes coming, the headline job openings number will trend down significantly for the rest of the year. That will solve some of the problem with the imbalance in the current tight labor market, slowing down job gains and economic activities to put inflation under control.
