U.S. job openings rose to a record high in July, suggesting a slowdown in job growth in August was an aberration and that the labor market was strong before the recent disruptive hurricanes.
U.S. job openings rose to a record high in July, suggesting a slowdown in job growth in August was an aberration and that the labor market was strong before the recent disruptive hurricanes. The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday showed the labor market continued to tighten amid a scarcity of workers. The strong labor market fundamentals could encourage the Federal Reserve to continue tightening monetary policy this year despite inflation persistently running below the U.S. central bank’s 2 percent target. “Employers need skilled labor and experienced workers are in short supply, which continues to suggest the economy has returned to a relatively normal labor market that does not need exceptional support from the Fed,” said John Ryding, chief economist at RDQ Economics in New York. Job openings, a measure of labor demand, increased by 54,000 to a seasonally adjusted 6.2 million. That was the highest level since the data series started in December 2000. Job openings have now been above 6 million for two straight months. Hiring increased 69,000 to 5.5 million in July, lifting the hiring rate to a near 1-1/2-year high of 3.8 percent from 3.7 percent in June. Labor market tightness was also underscored by another report from the National Federation of Independent Business. The NFIB survey showed a record share of small businesses in August ranked difficulties finding qualified workers as “their top business problem.” The rise in job vacancies in July bolsters views that August’s moderation in job gains was largely because of a seasonal quirk.
Nonfarm payrolls increased by 156,000 jobs last month, with the private services sector hiring the smallest number of workers in five months. Job growth in September could, however, be held back by hurricanes Harvey and Irma, which struck Texas and Florida, respectively. The two states account for about 14 percent of U.S. employment. Temporary unemployment as a result of flooding from Harvey has already caused a surge in first-time applications for jobless benefits. “The JOLTS data signal that the labor market was in solid shape in July and support our view that we should not be very concerned about the modest disappointment in the August payroll report,” said Daniel Silver, an economist at JPMorgan in New York.
JOLTS is one of the job market metrics on Fed Chair Janet Yellen’s dashboard. Economists expect the U.S. central bank will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its Sept. 19-20 policy meeting. Benign inflation amid sluggish wage growth, however, suggests the Fed will delay raising interest rates again until December. It has increased borrowing costs twice this year. Job openings in transportation, warehousing and utilities increased 70,000 in July and educational services had an additional 26,000 vacancies. There were 20,000 more job openings in construction.
Manufacturing, however, saw a 29,000 drop in vacancies in July. Health care and social assistance job openings decreased 72,000 and federal government vacancies declined 21,000. About 3.2 million Americans voluntarily quit their jobs in July, up from 3.1 million in June. The quits rate, which the Fed looks at as a measure of job market confidence, rose to 2.2 percent from 2.1 percent in June. “One of the problems facing firms is that workers are still pretty much locked into their current positions,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “With companies unwilling to bid for workers from other firms, there is little reason to leave and that is limiting the availability of qualified workers.” Layoffs fell 23,000 to 1.78 million in July.