The Labor Department’s JOLTS report showed the labor market as tight as ever, which could be bad news for Friday’s Labor Department unemployment report.
Employers can’t hire enough employees in several industries, with the largest increase in openings in accommodation and food services (+133,000), information (+40,000), and nondurable goods manufacturing and state and local government education (+31,000 each). Job openings decreased in finance and insurance (-89,000) and in wholesale trade (-48,000).
It means there is still a huge gap between the supply of workers willing to work and what businesses have been able to hire in many industries.
“The number of job openings was little changed at 10.9 million on the last business day of December, the U.S. Bureau of Labor Statistics reported today. Hires and total separations decreased to 6.3 million and 5.9 million, respectively. Within separations, the quits rate was little changed at 2.9 percent. The layoffs and discharges rate was little changed at 0.8 percent, a series low.”
The growing demand for workers in leisure activities, however, is a good sign that consumers are beginning to venture out as the Omicron variant wanes.
This is while manufacturing activity has slowed ever so slightly per the ISM’s Institute for Supply Management Manufacturing Index, slipping to a 14-month low of 57.6 percent in January from 58.8 percent because of the Omicron variant and ongoing shortages of labor and supplies that have slowed production.
The index of new orders dropped 3.1 points to 57.9 percent, the lowest level in a year and a half, and reflecting higher costs. The supply bottlenecks are reflected in the index of prices paid that rose to 76.1 percent from 68.2 percent in December, erasing some of the big decline at the end of 2021.
The U.S. economy is glowing red-hot now, and maybe overheating with soaring prices if supplies don’t catch up to demand soon. GDP grew 5.6 percent last year, the fastest growth rate in 40 years, and predicted to grow as much as 4 percent in 2022. This is far above the 2 percent average growth rate that prevailed since the end of the Great Recession in 2009.
The worker shortage is boosting workers’ wages, per the Atlanta Fed, as mentioned recently by Nobel Laureate Paul Krugman. A 3-month average of hourly wages has been growing at 4.5 percent, more than double the 2 percent rise that prevailed since 2010.
Will inflation cool because consumers spend less in the New Year as the pandemic aid dries up, and supply chains speed up deliveries, or must the Fed raise interest rates in the hope of taming it?
So what happens next?
Today’s ADP private payrolls report showed -301,000 jobs were lost in its January survey that precedes Friday’s unemployment report, with most losses in leisure activities due to the Omicron variant. This will surely downgrade current estimates of 150,000 added nonfarm payroll jobs in Friday’s report.
Harlan Green © 2022
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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