Job openings in the U.S. came in significantly above expectations for November and the previous month’s estimate saw a sizable upward revision, underscoring persistent tightness in the U.S. labor market that is likely to fuel inflation worries and push the Federal Reserve to continue its rate hikes.
The number of open positions at the end of November was 10.5 million—topping even the highest estimates. The median forecast was for 10.1 million.
The end of October figure was revised from 10.334 million to 10.512 million, indicating the jobs market was tighter than previously thought and the decline in openings at the end of last year was less substantial than it looked.
The figures come from the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS.
The Federal Reserve closely watches the job openings figure as a signal of demand for labor. Fed chairman Jerome Powell has said that in order to bring down inflation, the Fed will have to reduce demand for labor. The fear is that elevated demand for labor will push up wages and that will push up prices. Workers might then react to higher prices by seeking still higher wages, a process often described as a “wage-price spiral.”
Fed officials worry that if workers come to expect high levels of inflation will persist, inflation will become entrenched in the economy. Central bankers believe that inflation expectations are still well-anchored but fear this could change if the Fed does not tame inflation soon.
One key measure of labor market tightness watched by Fed officials is the ratio of unemployed persons to open jobs. Typically, these are evenly matched. Just prior to the pandemic, there were 1.2 jobs per unemployed person, a level that was considered elevated at the time and a sign of a tight labor market.
For over a year now, the ratio has been seriously unbalanced due to lower levels of unemployment and extremely elevated levels of job vacancies. Wednesday’s JOLTS report indicates that the ratio remained at 1.7 to 1 in December, a ratio unprecedented prior to the pandemic but slightly lower than the two-to-one ratio seen last year.
The number of workers quitting their jobs rose in November to 4.2 million from four million and the rate of quits ticked up from 2.6 percent of workers to 2.7 percent. Quits are regarded as another measure of labor market tightness, as workers tend to voluntarily leave jobs when they expect they can get better pay or work elsewhere.
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