WASHINGTON, March 8 (Reuters) – U.S. job openings fell less than expected in January and data for the previous month were revised higher, pointing to persistently tight labor market conditions that are likely to keep the Federal Reserve on track to raise interest rates for longer .
But the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, also suggested on Wednesday that some cracks were emerging in the labor market. Layoffs rose to the highest level in two years in January, and job cuts were higher than initially expected in 2022. Fewer people voluntarily quit their jobs.
Nevertheless, the labor market remains strong with 1.9 job openings per each unemployed in January, down from 2.0 in December. Fed Chairman Jerome Powell told lawmakers on Tuesday that the U.S. central bank would likely have to raise interest rates more than expected, opening the door to a half-percentage-point hike this month to combat inflation after a recent string of strong economic data .
“The decline in job openings does not indicate any meaningful improvement in the balance between labor demand and labor supply from the Fed’s perspective,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York. “If you wanted to grab the straw, you could point to the second drop in a row in the number of people quitting.”
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Job openings, a measure of labor demand, fell by 410,000 to 10.8 million on the last day of January. Data for December was revised higher to show 11.2 million job openings instead of the previously reported 11.0 million. Economists polled by Reuters had predicted 10.5 million job openings.
The report also showed that job openings were mostly higher than originally estimated in 2022, averaging 11.2 million, up 1.2 million from 2021. The monthly decline in vacancies was across all four regions with large declines in the Midwest and West, the epicenter of the tech job cuts.
Construction, the biggest casualty of the Fed’s aggressive monetary tightening campaign, saw job openings fall by a record 240,000.
There were 204,000 fewer vacancies in accommodation and food service, while job openings fell by 100,000 in the finance and insurance industry. Employment in the leisure and hospitality industry, which covers accommodation and food services, remains below its pre-pandemic level. This sector has been the biggest driver of job growth.
Vacancies also fell in durable goods manufacturing, retail trade, and state and local government. But job openings increased in transportation, warehousing and utilities as well as non-durable goods manufacturing.
The job opening rate fell to a still high 6.5% from 6.8% in December. It averaged 6.8% in 2022, up from 6.4% in 2021.
Hiring rose to 6.4 million from 6.3 million in December. The employment rate rose to 4.1% from December’s 4.0%. There were 77.2 million hires in 2022, a gain of 1.2 million from 2021. The hiring rate averaged 4.2% in December, down from 4.3% in 2021.
Layoffs rose by 241,000 to 1.7 million, the highest level since December 2020, concentrated in the professional and business services sectors. However, layoffs fell in the federal government. They rose sharply in the South, which has experienced an employment boom.
Redundancies increased by 461,000 in 2022 to 17.6 million. The layoff rate rose to a still-low 1.1% from 1.0% in December. While the rate remains below its pre-pandemic high of 1.3%, the number of layoffs is now closer to the average of 1.9 million before the onset of the COVID-19 public health crisis.
“This suggests that the period of unprecedented job security for American workers is coming to an end,” said Julia Pollak, chief economist at ZipRecruiter.
About 3.9 million people quit their jobs. It was the fewest since May 2021 and fell by 207,000 from December. The decline was most in professional and business services, educational services and the federal government. A record 50.6 million people quit in 2022.
FEWER WORKERS QUITTING
Stocks on Wall Street were mixed. The dollar was steady against a basket of currencies. US Treasury bond prices rose.
The unemployment rate, seen as a measure of labor market confidence, fell to 2.5% from 2.6% in December, still above pre-pandemic standards of around 2.3%.
“Recent developments in this measure, despite showing a decline this month, suggest that underlying wage pressures should remain elevated, although pressures are easing somewhat,” said Marc Giannoni, chief U.S. economist at Barclays in New York. “We continue to forecast that the pace of growth in wage employment will reflect a robust labor market.”
Labor market strength was bolstered by the ADP National Employment report, which showed private sector employment rose by 242,000 jobs in February after a 119,000 increase in January.
Job growth was robust in January, with the unemployment rate falling to a more than 53-1/2-year low of 3.4%.
According to a Reuters poll of economists, nonfarm payrolls are expected to rise by 205,000 jobs in February after a gain of 517,000 in January.
Data from Indeed showed job postings on the platform fell throughout February, which it said suggested there were 10.3 million openings at the end of last month.
“That would be another drop of about 500,000 openings,” said Nick Bunker, head of economic research at Indeed Hiring Lab. “Even so, openings would still be 47% higher than they were before the pandemic. The labor market is cooling, but it’s still hot.”
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
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