The US labor market is very tight, job vacancies near a record high in January

A tractor-trailer advertising job opportunities in the trucking industry heads south on Interstate 81 near Staunton, Virginia, U.S., January 22, 2022. REUTERS/Evelyn Hockstein

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  • Job vacancies fall by 185,000 to 11.263 million in January
  • December job postings revised to record 11.448 million
  • Hiring increases modestly; resignations decline 151,000

WASHINGTON, March 9 (Reuters) – U.S. job openings fell in January but remained near record highs as labor shortages persisted, pointing to a tight labor market that will continue to generate strong wage increases and help keep inflation high.

Job postings, a measure of labor demand, fell by 185,000 to 11.263 million on the last day of January, the Labor Department reported Wednesday in its monthly job postings survey and staff turnover, or JOLTS report.

December data has been revised up to show a record 11.448 million job openings instead of the 10.925 million previously reported. The government has revised the data for 2021.

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“The labor market is tight as a drum and that means wage pressures and inflation will persist,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “Time will tell if the war in Europe and falling stock prices will dampen demand for new hires in the months ahead.”

The Federal Reserve is expected to raise interest rates next Wednesday to curb inflation. Economists expect up to seven rate hikes, though much of that depends on the fallout from Russia’s war on Ukraine. The United States and its allies imposed severe sanctions on Moscow. On Tuesday, President Joe Biden banned imports of Russian oil into the United States.

The two-week war has pushed up the prices of oil, wheat and other raw materials. Economists say excess demand for labor could act as a shield for the economy, even as the Russian-Ukrainian war is seen as hurting business confidence.

“The labor market still has room to slow gracefully as demand cools, but not necessarily to collapse,” said Nick Bunker, director of economic research for North America at the Indeed Hiring Lab. “But so far, the data on openings and turnover does not show that this trend is starting.”

In January, job vacancies fell in several sectors, with accommodation and food services registering a drop of 288,000.

In the transportation, warehousing and utilities industry, job openings fell by 132,000, while federal government vacancies fell by 60,000. But job openings rose by 136,000 in other service companies. The durable goods manufacturing industry recorded 85,000 additional job creations. The job creation rate fell to 7.0% from 7.1% in December.

BLOWS

HUGE GAP BETWEEN SUPPLY AND DEMAND

Hiring rose by a modest 7,000 to 6.5 million. Hiring was little changed across all industries. The hiring rate remained unchanged at 4.3%. The government announced last week that non-farm payrolls rose by 678,000 in February.

There was a gap of 4.8 million between the number of job vacancies and the number of unemployed in January, representing 2.9% of the labor force.

Economists see the gap between jobs and workers as a better indicator of labor market tightening and wage growth. There were a record 1.8 jobs open per unemployed person in January, also underscoring tight labor market conditions.

The US Chamber of Commerce has urged lawmakers to boost legal immigration.

“It’s long overdue for Congress to act to modernize our broken immigration system,” Neil Bradley, director of policy for the U.S. Chamber of Commerce, said in a statement. “We can’t get inflation under control, unclog our supply chains, or fully develop our economy and stay competitive unless we welcome more people into our country to fill those jobs.”

The JOLTS report also showed that the number of people leaving their jobs voluntarily fell by 151,000 to a still high level of 4.3 million in January.

Fewer people quit in the retail and information sectors, but more quit their jobs in finance and insurance. The resignation rate fell to 2.8% from 3.0% in December. The revisions also showed that 47.8 million people left their jobs in 2021.

“Before the pandemic, quits accounted for an average of 50% of all terminations,” said Julia Pollak, chief economist at ZipRecruiter. “In 2021, however, they were 70%, a sign that workers had more job security than usual and were largely the decision makers.”

The JOLTS report backed economists’ view that February’s slowing wage growth was a fluke. The average hourly wage remained unchanged last month, bringing the annual wage increase to 5.1% from 5.5% in January

“These data tell us a lot more about the labor market than the stable reading of overall average hourly earnings for February,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.

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Reporting by Lucia Mutikani; Editing by Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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