Job openings keep beating forecasts

Total job openings were at 10.8 million in January. Though they came down by 410,000 from December last year, they remained elevated and higher than the level that we saw in November. The revised annual average job openings reached 11.2 million in 2022, 200,000 above the previous estimate.

The imbalance in the labor market continued. The ratio of job openings to job seekers came down to 1.9 from 2.0 in December. For every unemployed job seeker, there were close to two jobs available.

The industry details were mixed. Job postings for professional and business services (95,000), other services (43,000), nondurable goods manufacturing (50,000), wholesale trade (50,000), and transportation (94,000) increased. A surprise was an increase in job postings in the information sector, which spans tech to media and publishing. The skills that tech workers possess are still in high demand.

Firms outside of the tech sector have been absorbing those displaced across the tech behemoths. Adverse selection is at play, as those who could hope before being laid off. This could better distribute the knowledge that tech workers have across the economy and boost productivity growth in years to come. 

Job postings in construction (-240,000) and financial activities (-151,000) continued to drop. The effects of higher rates are beginning to be felt in the most interest rate sensitive of sectors, new home construction and loan demand.

Leisure and hospitality (-194,000) and retail trade (-94,000) contracted after gaining ground in the fourth quarter. However, the level of job openings remains elevated, especially in leisure and hospitality. The ranks of those unable to work due to vacation now outnumber those out sick. Many hotels and resorts are attempting to reinstate services suspended during the pandemic; that include room cleaning.

Total hires moved up to 6.4 million in January, a gain of 121,000 month over month. Hiring tends to lag posting, so much of that strength reflects people who accepted jobs in December. No industries posted a significant slowdown in hiring during the month. This is consistent with the strong January employment report and increase in labor hoarding we saw. The Federal Reserve’s Beige Report revealed that firms were holding onto workers longer due to ongoing shortages, even as demand waned.

Total quits decreased by 207,000. Professional and business services drove the drop in quits. Not surprisingly, professional and business services saw the worst increase in layoffs and discharges; it alone accounted for close to 80% of the total net layoffs in January.

The slowdown of quit rates is on the surface welcome news to the Federal Reserve, as it should help to cool wage gains. The ADP preliminary payroll data showed the premium for job hopper remained high in January but cooled a bit in February. Advertised wages on job posting sites have fallen considerably in recent months, suggesting fewer opportunities for job hoppers.

Bottom Line:

Labor demand remained high, despite some signs of cooling. The strong demand for labor persisted in many industries. The ratio of job openings per job seeker, an indicator the Fed watches closely, held close to two-to-one. January’s data keep a half percent rate hike on the table in March.