A now hiring sign is posted at a Panda Express restaurant in Marin City, Calif., on Aug. 5.Justin Sullivan/Getty Images
U.S. job openings increased in July and data for the prior month was revised sharply higher, pointing to persistently strong demand for labour that is giving the Federal Reserve cover to maintain its aggressive interest-rate increases.
The Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report, released Tuesday showed there were two jobs for every unemployed person last month, pointing to extremely tight labour-market conditions. It suggested that fears the economy was in recession, after two straight quarterly drops in gross domestic product, were greatly exaggerated.
“The Fed has front-loaded its monetary restraint this year to an unprecedented degree and the economy isn’t giving them any reason to hold back,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The labour market is strong as a bull, two jobs out there for the unemployed to choose from.”
Job openings, a measure of labour demand, increased 199,000 to 11.239 million on the last day of July. Data for June was revised higher to show 11.04 million job openings, instead of the previously reported 10.698 million. Economists polled by Reuters had forecast 10.45 million vacancies.
There were an additional 81,000 job openings in the transportation, warehousing and utilities industries last month. Job openings increased by 53,000 in the arts, entertainment and recreation sector, while the federal government had 47,000 more openings and state and local government education had an additional 42,000 unfilled jobs ahead of the new school year.
But job openings decreased by 47,000 in the durable goods manufacturing industry. There were more job openings in the West, while the South and Midwest saw small gains. Vacancies fell in the North-East.
The Fed is trying to cool demand for labour and the overall economy to bring inflation down to its 2-per-cent target.
Fed chair Jerome Powell warned last week that Americans were headed for a painful period of slow economic growth and possibly rising unemployment as the U.S. central bank aggressively raises interest rates in a bid to bring supply and demand back into balance. The Fed has raised its policy rate by 225 basis points since March.
The job-openings rate climbed to 6.9 per cent last month from 6.8 per cent in June. Hiring slipped to 6.382 million from 6.456 million in June, keeping the hiring rate unchanged at 4.2 per cent. The jobs-workers gap rose to 3.4 per cent of the labour force from 3.1 per cent in June.
Layoffs dropped to 1.398 million from 1.4 million in June. There were decreases in leisure and hospitality and professional and business services, as well as finance activities. These offset a surge in trade, transportation and utilities industries.
About 4.179 million people quit their jobs, down from 4.253 million in June. The quits rate, viewed by policy makers and economists as a measure of job-market confidence, dipped to a 14-month low of 2.7 per cent, from 2.8 per cent in June.
Still, confidence in the labour market remains high. A separate report from the Conference Board on Tuesday showed its so-called labour market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, edged down to 36.6 this month from a reading of 36.8 in July.
This measure correlates to the unemployment rate from the Labor Department.
U.S. stocks fell on the data. The dollar was steady against a basket of currencies. U.S. Treasury prices were mixed.
“Markets will misread this report as an indication that the Fed will hike rates more than expected,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Va. “The Fed is prone to mistakes and there is a very good chance that inflation comes down for reasons other than rate increases.”
The Conference Board’s overall consumer confidence index rebounded to 103.2 this month from 95.3 in July, ending three straight monthly drops. Economists had forecast the index would climb to 97.7. Consumers’ inflation expectations over the next 12 months fell to 7.0 per cent, from 7.4 per cent in July.
Despite the high inflation expectations, the share of consumers planning to go on vacation over the next six months surged to an eight-month high.
There were also increases in the shares of consumers planning to buy motor vehicles, as well as major household appliances such as refrigerators, washing machines, dryers and televisions over the next six months, which could keep consumer spending supported in the third quarter and the economy growing.
Gross domestic product fell at a 0.6-per-cent annualized rate last quarter, after contracting at a 1.6-per-cent pace in the January-March quarter.
“Recession talk hasn’t gone away, but it certainly got a little more quiet lately,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
Higher mortgage rates resulting from the Fed’s aggressive monetary policy posture did not discourage potential homebuyers in August, as more consumers planned to buy a house over the next six months, likely encouraged by sellers lowering asking prices. That is slowing the pace of monthly house-price inflation.
A third report on Tuesday showed the S&P CoreLogic Case-Shiller national home-price index increased 0.3 per cent in June, after accelerating 1.3 per cent in May. That lowered the annual increase to 18 per cent from 19.9 per cent in May. Prices slowed considerably in the West, with monthly declines in Seattle and San Francisco.
Cooling monthly house-price growth was evident in a fourth report from the Federal Housing Finance Agency showing prices gained 0.1 per cent after increasing 1.3 per cent in May. In the 12 months through June, prices rose 16.2 per cent, after surging 18.3 per cent in May.
With supply still tight, house-price growth was likely to persist, though with some months of negative readings.
“Even with a few months of outright declines, however, home prices will likely finish the year solidly in positive territory,” said Mark Vitner, a senior economist at Wells Fargo in Charlotte, N.C.
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