The labor market remains tight while US job openings increase to five months high

The number of job openings in the US grew unexpectedly in December, indicating that the demand for labor remains strong even amidst the high-interest rates and the rising fears of a recession. This could set the Federal Reserve on another policy-tightening spree to take control of the situation. The monthly Job Openings and Labor Turnover Survey, or JOLTS report, by the Labor Department, showed on Wednesday that there were 1.9 job openings per unemployed person in December.

This persisting labor tightness did not affect the US central bank’s decision to raise its policy rate by 25 basis points, as a result of the two-day meeting that ended this Wednesday. This action caused a further slowdown of the Fed’s rate hikes. However, the Federal Reserve promises ongoing increases in borrowing costs.

Christopher Rupkey of FWDBONDS in New York feels that this could be the first recession in history where we don’t see material job losses. On the positive side, the inflation pressures seem to be cooling, even without the labor market cooling down. The number of job openings is usually used as a measure of labor demands. By the last day of December, job openings increased 572,000 to reach 11.0 million. This figure is a five-month high number. A Reuters poll of economists only forecasted 10.250 million job openings previously.

Most of the vacancies were concentrated in the leisure and hospitality industry and retail trade, causing experts to predict that the December job surge will be temporary. However, some economists believe that difficulties in adjusting data for seasonal fluctuations have affected the data. US economist Matthew Martin who works for Oxford Economics in New York says that the leisure and hospitality sectors were responsible for three-quarters of the total increase in job openings. This is the highest figure seen for the industry since December 2021. He also points out that the jump in retail hiring is at odds with the slower pace of seasonal hiring we saw during the holidays last year.

409,000 jobs were left unfilled in the accommodation and food services industry, showing that employment in this sector is still below its pre-pandemic level. 134,000 more job openings remained in the retail trade sector, while the construction sector, which was deeply affected by the higher borrowing costs, had only 82,000 openings.

The job openings rate, which was at 6.4% in November, rose to 6.7% in December. Hiring too increased up to 6.2 million from 6 million in the previous month. The hires rate also increased up to 4.0% in December. However, wage growth cooled in the fourth quarter of 2022.