Job Market Tightens in January as Layoffs and Quits Rise, Fed Watching Closely
The number of job openings in the United States fell to 10.8 million in January, down from an upwardly revised 11.23 million in December, according to the Bureau of Labor Statistics’ monthly Job Openings and Labor Turnover Survey (JOLTS). Hiring increased to 6.37 million from 6.25 million, layoffs surged to 1.72 million from 1.48 million, and quits dropped to 3.89 million from 4.09 million. The construction, leisure, and hospitality industries reported the largest pullbacks in job openings.
Payroll provider ADP reported that private employers added 242,000 jobs in February, a higher figure than expected. This was bolstered by a rising unemployment claims figure, indicating that demand for employees still far outpaces the supply of available workers. Quits, a signal of worker confidence in mobility, fell to 3.88 million, the lowest level since May 2021, while layoffs increased 16% to 1.7 million.
Monetary policy is carefully crafted by Federal Reserve officials who pay close attention to the JOLTS report. This week, while speaking on Capitol Hill, Fed Chairman Jerome Powell referred to the labor market as “extremely tight” and warned that the recent data displaying a revival of inflation could cause interest rate increases to be higher than anticipated.
The imbalance between worker supply and demand means the US job market remained tight in January, which is not what the Federal Reserve is looking for in its efforts to cool the economy. Markets initially expected the Fed to continue raising rates at a quarter-point pace, but this could change depending on other key reports slated for release over the next week.
In spite of January's booming figures, the JOLTS report revealed signs of a cooling labor market. Layoffs rose sharply, and quits fell to their lowest level since May 2021. This suggests that the period of unprecedented job security for American workers is coming to a close. Thus, the Fed will be closely watching the labor market data in the coming weeks to determine the size and pace of future monetary policy actions.
0. “ABC: Construction Job Openings Plummet by a Shocking 240,000 in January | News Releases” Associated Builders and Contractors, 8 Mar. 2023, https://www.abc.org/News-Media/News-Releases/entryid/19847/abc-construction-job-openings-plummet-by-a-shocking-240000-in-january
1. “Job Openings Declined in January But Still Far Outnumber Available Workers” NBC 6 South Florida, 8 Mar. 2023, https://www.nbcmiami.com/news/business/money-report/job-openings-declined-in-january-but-still-far-outnumber-available-workers/2988411
2. “U.S. job openings dipped in January” Axios, 8 Mar. 2023, https://www.axios.com/2023/03/08/january-job-report-openings-layoffs
3. “ADP National Employment Report: Private Sector Employment Increased by 242,000 Jobs in February; Annual Pay …” PR Newswire, 8 Mar. 2023, https://www.prnewswire.com/news-releases/adp-national-employment-report-private-sector-employment-increased-by-242-000-jobs-in-february-annual-pay-was-up-7-2-301765698.html
4. “Job openings dipped in January but remain historically high” Fox Business, 8 Mar. 2023, https://www.foxbusiness.com/economy/job-openings-dipped-january-remain-historically-high
5. “The number of available jobs in the US shrank in January” erienewsnow.com, 8 Mar. 2023, https://www.erienewsnow.com/story/48514834/the-number-of-available-jobs-in-the-us-shrank-in-january
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