US job openings surged to a record high in April and employers appeared to have trouble finding suitable workers, pointing to a tightening labor market that could encourage the Federal Reserve to raise interest rates next month.
US job openings surged to a record high in April and employers appeared to have trouble finding suitable workers, pointing to a tightening labor market that could encourage the Federal Reserve to raise interest rates next month. The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS, published on Tuesday also suggests that a recent moderation in job growth could be the result of a skills mismatch rather than easing demand for labor. “These data underscore the difficulty in hiring new workers, which we think is increasingly likely to be a factor restraining payroll growth going forward,” said John Ryding, chief economist at RDQ Economics in New York. “The Fed becomes somewhat uneasy when the labor market becomes too tight and this report supports the Fed’s case to nudge rates higher next week.” JOLTS is one of the metrics on Fed Chair Janet Yellen’s so-called dashboard of labor market indicators. It came ahead of the U.S. central bank’s June 13-14 policy meeting, at which it is expected to raise its benchmark overnight interest rate by 25 basis points. Job openings, a measure of labor demand, increased 259,000 to a seasonally adjusted 6.0 million in April, the highest since the government started tracking the series in 2000. The monthly increase was the largest in just over a year and pushed the jobs openings rate to 4.0 percent, the highest since last July, from 3.8 percent in March.
Hiring, however, decreased by 253,000 jobs to 5.1 million. That lowered the hiring rate to a one-year low of 3.5 percent from 3.6 percent in March. The gap between job openings and hiring points to a growing skills mismatch. A report from the National Federation of Independent Business last week showed the share of small business owners reporting job openings they could not fill in May was the highest since November 2000.
The economy created 138,000 in May, well below the average monthly job gains of 181,000 over the prior 12 months. Economists believe tightening labor market conditions could soon unleash a faster pace of wage growth. Wage gains have remained sluggish even as the unemployment rate has tumbled to a 16-year low of 4.3 percent. The JOLTS report also showed 1.6 million people were laid off in April, little changed from March. The layoffs and discharges rate was unchanged at 1.1 percent for five straight months. The number of people voluntarily quitting their jobs fell by 111,000 to 3.0 million in April.As a result, the quits rate, which the Fed looks at as a measure of job market confidence, dipped to 2.1 percent from 2.2 percent in March.”The economy has already reached the nirvana of full employment. At full employment the focus shifts from worries about the demand for labor to concerns about the supply of labor,” said Chris Rupkey, chief economist at MUFG in New York.”There aren’t enough workers to man the factories and stock the store shelves. The supply demand imbalance is only likely to grow worse as the baby boom generation retires.”