US job vacancies fell less than expected in January and data for the previous month was revised higher, suggesting a continued tight labor market that will likely keep the Federal Reserve on track to hike rates for longer.
But the U.S. Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Wednesday also pointed to some cracks in the job market. The number of layoffs increased in January and the number of layoffs was higher than initially thought in 2022. Fewer people leave their jobs voluntarily.
Nevertheless, the labor market has remained strong, with 1.9 vacancies per unemployed person in January. Fed Chairman Jerome Powell told lawmakers on Tuesday that the U.S. central bank would likely have to raise rates more than expected and opened the door to a half-percentage point hike this month to fight inflation following a recent string of strong economic data.
“The decline in job openings does not indicate a significant improvement in the balance between labor demand and supply from a Fed perspective,” said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.
Job vacancies, a measure of labor demand, fell by 410,000 to 10.8 million on the last day of January. The data for December was revised higher and showed 11.2 million job openings instead of the previously reported 11 million. Economists polled by Reuters had predicted 10.5 million job openings.
The report also showed that job openings in 2022 tended to be higher than initially estimated, averaging 11.2 million, an increase of 1.2 million from 2021.
The drop in January, which occurred in all four regions, was driven by construction, with 240,000 fewer vacancies. Vacancy fell by 204,000 in the hospitality sector and by 100,000 in the financial and insurance sector.
Employment in the leisure and hospitality sector, which includes accommodation and food services, has remained below pre-pandemic levels. This sector has been the biggest driver of job growth.
Job openings increased in transportation, storage and utilities, as well as non-durable goods manufacturing.
The vacancy rate fell from 6.8 percent in December to a still high 6.5 percent. It averaged 6.8 percent in 2022, up from 6.4 percent in 2021.
The number of new employees increased from 6.3 million in December to 6.4 million. The rental percentage rose from 4 percent in December to 4.1 percent. There were 77.2 million hires in 2022, a gain of 1.2 million over 2021. The hiring rate averaged 4.2 percent in December, up from 4.3 percent in 2021.
The number of layoffs increased by 241,000 to 1.7 million, mainly in professional and business services. However, the number of layoffs in the federal government decreased. They will increase by 461,000 in 2022 to 17.6 million. Yet they remain low by historical standards.
About 3.9 million people have quit their jobs, 207,000 fewer than in December. The decrease was mainly in professional and business services, education services and the federal government. A record 50.6 million people will retire in 2022.
“Last year’s job market may not have been as beneficial to workers as we thought, as layoffs were revised downwards and layoffs revised upwards,” said Nick Bunker, head of economic research at Indeed Hiring Lab. “But by all standards, both measures showed a tight, hot labor market.”
US equities were mixed. The dollar had changed little against a basket of currencies. US Treasury bond prices rose.
Private payrolls are rising
The strength of the labor market was bolstered by the ADP National Employment Report, which showed private employment increased by 242,000 jobs in February, following an increase of 119,000 in January. Economists had predicted that private employment would increase by 200,000.
Job growth was robust in January, with the unemployment rate falling to a more than 53.5-year low of 3.4 percent. Consumer spending rebounded strongly and inflation picked up in January.
The ADP report shows that hiring is still concentrated in the services sector, which added 190,000 jobs last month, mostly in the leisure and hospitality sector.
There were also gains in finance, education and healthcare, information and commerce, transportation and utilities. But professional and business services cut 36,000 jobs. The goods-producing sector added 52,000 jobs, while manufacturing created 43,000 jobs. But construction payrolls fell by 16,000 jobs.
Nonfarm payrolls are forecast to rise by 205,000 jobs last month, following a rise of 517,000 in January, according to a survey of Reuters economists.