Job vacancies rose in July, dashing Fed hopes for cooling
WASHINGTON - The number of open jobs in the United States rose in July after three months of declines, a sign that employers are still urgently seeking workers despite a weakening economy and high inflation.
The increase that the government reported Tuesday will be a disappointment for Federal Reserve officials, who are seeking to cool hiring and the economy by raising short-term interest rates to try to slow borrowing and spending, which tend to fuel inflation. Fed officials hope that their policies will serve primarily to reduce job openings and spare workers the pain of widespread layoffs and higher unemployment.
There were 11.2 million open jobs available on the last day of July — nearly two jobs, on average, for every unemployed person — up from 11 million in June. June's figure was also revised sharply higher.
"The Fed has made very little progress in terms of narrowing the gap between labor supply and demand," Aneta Markowska, chief economist at investment bank Jefferies, wrote in a research note.
Reducing the high demand for workers to a level closer to the available supply would ease the pressure on companies to pay higher wages to attract and keep workers. Higher pay has been passed on by many businesses to consumers in the form of higher prices, thereby intensifying inflation.
Last month, job openings rose in retail, warehousing and shipping, professional services, and in state and local education. Openings declined in manufacturing and health care.
The number of people who quit their jobs declined slightly in July, to 4.18 million from 4.25 million in June, according to Tuesday's report. People typically quit jobs for a new position, usually at higher pay. As a result, fewer quits could lessen the pressure on companies to raise pay. But quitting still remains far above pre-pandemic levels, when it rarely topped 3 million.
The data released Tuesday also included a measure of layoffs, which slipped slightly in July. Despite high-profile reports of job cuts, the report reinforced the impression that most companies are holding onto the vast majority of their employees.
Job vacancies have been elevated since the economy began recovering from the pandemic recession more than two years ago. As demand has rapidly rebounded, employers have sought to quickly add workers.
When COVID-19 struck and widespread shutdowns were imposed in March and April of 2020, businesses slashed 22 million jobs. Yet not all workers have returned as the economy has recovered. There are now fewer people working or looking for work compared with pre-pandemic trends. The number of open jobs reached a record level of 11.9 million in March, before declining for three months. Before the pandemic, they had never topped 8 million.
The latest figures suggest that demand for workers remains hot. On Friday, the government will release its monthly jobs report, which is expected to show that 300,000 jobs were added, a slowdown from the previous month when hiring topped a half-million, but still a healthy number.
Fed Chair Jerome Powell and other policymakers have said they hope to reduce the number of open jobs without causing much higher unemployment. Larry Summers, a former Treasury Secretary, and Olivier Blanchard, former chief economist of the International Monetary Fund, have argued that such an outcome is unlikely.
“A reduction in (job) vacancies can take place without a big loss of employment, and this is the kind of soft landing anticipated” by Fed officials, Christopher Waller, a member of the central bank's Board of Governors, said last month.
The Fed is trying to engineer a so-called soft landing — a slowdown in the economy that reduces inflation — currently near four-decade highs — without causing a recession.
Yet Blanchard and Summers argue that historically, job openings have never declined without an accompanying rise in layoffs.
“The sad truth is that there is no such thing as a slowdown without an increase in unemployment,” Blanchard wrote earlier this month, calling the Fed’s efforts to lower job vacancies without increasing layoffs “a vain hope.”