US job openings increase to five-month high, manufacturing slumps

Gap between job openings and hiring suggests wage growth could remain high, an indicator that interest rates could rise.

A hiring sign in the parking lot of Mariano's grocery store advertises the availability of jobs, in Chicago, US
Demand for labour in the US remains strong despite higher interest rates [File: Charles Rex Arbogast/AP]

Job openings in the United States unexpectedly rose in December, showing demand for labour remains strong despite higher interest rates and mounting fears of a recession, which could keep the Federal Reserve on its policy tightening path.

There were 1.9 job openings for every unemployed person in December, the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, showed on Wednesday. Signs of persistent labour tightness were unlikely to change expectations that the US central bank would further slow the pace of its rate hikes when policymakers conclude a two-day meeting later on Wednesday.

“This could well be the first recession in history without material job losses,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “It’s a good thing for the Fed that inflation pressures are cooling because the labour market isn’t cooling at all.”

Job openings, a measure of labour demand, increased by 572,000 to a five-month high of 11 million on the last day of December. Economists polled by Reuters had forecast 10.25 million job openings.

Accommodation and food services led the increase in job openings, with unfilled jobs rising by 409,000. Employment in the industry remains below its pre-pandemic level. There were 134,000 more openings in retail trade.

Construction, which has been hammered by higher borrowing costs, had 82,000 additional vacancies.

The job openings rate shot up 6.7 percent from 6.4 percent in November. Hiring increased to 6.2 million from 6 million. The hires rate rose to 4 percent from 3.9 percent in November. The gap between job openings and hiring suggests wage growth could remain elevated although it cooled in the fourth quarter.

The US central bank is expected to raise its benchmark interest rate by 25 basis points on Wednesday. Through last year, the Federal Reserve raised its policy rate from the near-zero level to a range of 4.25 percent to 4.5 percent, the highest since late 2007.

Aggressive monetary policy tightening has left economists expecting a recession by the second half of the year. The housing market has slumped, and a downturn in manufacturing is intensifying.

A separate report from the Institute for Supply Management on Wednesday showed its PMI, or purchasing managers index, in the manufacturing sector dropped to 47.4 in January from 48.4 in December. The third straight monthly contraction pushed the index to its lowest level since May 2020 and below the 48.7 mark, viewed as consistent with a recession in the broader economy.

US stocks were trading lower on Wednesday. The dollar fell against a basket of currencies, and US Treasury prices rose.

Layoffs low

Despite the deterioration in conditions, factories did not appear to be laying off workers in large numbers. That was reinforced by the JOLTS report, which showed layoffs climbing to 1.5 million in December from 1.4 million in November. The layoffs rate edged up to 1 percent from 0.9 percent in November.

Workers also continued to voluntarily quit their jobs in December. The quits rate, which is viewed as a measure of labour market confidence, was unchanged at 2.7 percent.

A third report showed private employment increased by 106,000 jobs last month after rising by 253,000 in December, well below economists’ expectations for a gain of 178,000. The ADP National Employment report, however, attributed the weaker-than-expected private payrolls gain to bad weather in mid-January, including flooding in California.

According to a Reuters survey of economists, non-farm payrolls likely increased by 185,000 jobs in January after rising by 223,000 in December.

Source: Reuters