After January’s jobs report blew expectations out of the water, economists are looking for any data that can show signs of a weakening labor market up ahead. Wednesday’s job openings data showed a hint of decline, but still came in stronger than expected.
The Bureau of Labor Statistics data showed that by the end of January, job openings dipped down to 10.8 million. That is still historically high and higher than the expected 10.5 million cooldown, but is 10% below the job openings peak of 12 million in March 2022.
Looking at job separations, quits are down slightly at 3.9 million while layoffs and firings are up slightly at 1.7 million. Driving the 410,000 drop in job openings from December is a 240,000 decline in job openings in construction. Accommodations and food services along with finance and insurance sectors also saw declines in openings, while job openings increased in transportation, warehousing and utilities, and in nondurable goods manufacturing.
Inflation is the reason many economists are practically rooting for the labor market to get worse. Unemployment is at its lowest level since 1969 at 3.4%, and despite high prices, Americans are out healthily spending money, which helps keep prices high. The Federal Reserve has argued that to bring down inflation, unemployment will need to rise. The latest projections have the rate hitting 4.6% by the end of 2023.
In Senate testimony Tuesday, Fed Chair Jerome Powell said people losing jobs is not an intended consequence of the inflation fight in a testy exchange with Sen. Elizabeth Warren, D-Mass. Warren pointed out that to achieve 4.6% unemployment, around 2 million Americans would lose their jobs.
“If you could speak directly to the 2 million hardworking people who have decent jobs today, who you are planning to get fired over the next year, what would you say to them? How would you explain your view that they need to lose their jobs?” Warren asked.
“I would explain to people more broadly that inflation is extremely high and it is hurting the working people of this country badly. All of them, not just 2 million of them, but all of them are suffering under high inflation, and we are taking the only measures we have to bring down inflation,” Powell answered.
Fed officials have warned that interest rates will need to go even higher to bring down inflation, which climbed in January, according to the Federal Reserve’s preferred inflation gauge.
Looking ahead, on Friday, the initial jobs report for February will be released. Economists expect to see an uptick in unemployment. Next week, the February consumer price index comes out.
