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The latest job market data is creating uncertainty in interest-rate projections.
The significant increase in job openings in April may lead the Federal Reserve to raise interest rates further.
The link between high job vacancies, calculated by the government, and low unemployment has been frequently cited by Jerome H. Powell, the Federal Reserve Chair, as a key sign of unsustainably hot labor market conditions that are “clearly out of balance, with demand for workers substantially exceeding the supply of available workers.”
While economists have mixed feelings with regards to the progress made in controlling prices, some fear that job openings as a central measure of labor market balance may lead to borrowing cost for households and businesses remaining high for too long resulting in a more profound downturn than necessary.
Skanda Amarnath, the executive director of “Employ America,” a nonprofit organization that supports tight labor markets, noted that “The quits rate is nearly back to prepandemic levels, the hires rate has already reverted to prepandemic pace. JOLTS data should not drastically color this broader assessment of labor market tightness but will matter at the margins for the Fed’s own perception of labor market heat.”
There are questions regarding the weight given to the report.
After reaching a record high of around 12 million in March 2022, job openings measured by the government have declined across the board due to a mix of strong demand for positions on offer and a reduction in business sentiment that prompted a drop in new listings. However, the seen uptick in job openings in April indicates at least a pause in these trends.
Some economists believe that the JOLTS report’s reliability should be taken with a grain of salt. Gregory Daco, the chief economist at EY-Parthenon, commented that the increase in job vacancies could reflect summer hiring in the growing service sector, although he added, “I’d want to see June before assuming that summer hiring is stronger than last year.”
The report is based on survey data from around 21,000 nonfarm businesses and government establishments. Goldman Sachs’ economic research team argues for taking JOLTS data with a grain of salt as the response rate has fallen sharply since the beginning of the pandemic. “These findings argue for currently treating JOLTS less like the ‘true’ level of job openings,” stated the team.
The next gauge will be the May jobs report.
The employment situation report for May, to be published by the Labor Department on Friday, will provide a complete and up-to-date labor market status before federal policymakers’ meetings on June 13 and 14.
According to a Bloomberg survey, economists expect the data to reveal the addition of 195,000 jobs adjusted seasonally, down from the initial April report’s 253,000. The unemployment rate, which registered a 3.4 percent in April––the lowest level since 1969––is expected to rise to 3.5 percent, and the rise in wages month-over-month is expected to ease.
