Latest / The Macro Memo with Fexingo: Daily Conversations on Inflation, GDP, and Federal Reserve Policy / Why Job Openations Surged While Unemployment Stayed Flat
Transcript
- Lucas: So the big number this week — job openings surged to 7.6 million in April, the highest in nearly two years. That's from the JOLTS report on Tuesday. And yet the unemployment rate hasn't budged from 4.3 percent. Luna: That feels contradictory. More openings but no drop in unemployment? Usually when openings go up, people find jobs faster and unemployment falls. Lucas: Right, that's the classic relationship. But what we're seeing is a labor market that's still tight, but not because workers are scarce — because the matching process is broken in certain sectors. Luna: Meaning companies are hiring for roles that the available workers don't have the skills for, or the location doesn't match? Lucas: Exactly. The JOLTS increase was concentrated in professional and business services, up about 300,000 openings. And in leisure and hospitality, up 200,000. Meanwhile, construction openings actually fell. So it's not a broad-based surge — it's very sector-specific. Luna: And the unemployment rate staying flat at 4.3 percent suggests people aren't flowing into those openings. Either they lack qualifications or they're not looking in those sectors. Lucas: Precisely. The quits rate also ticked up slightly to 2.2 percent, but it's still well below the 3 percent peak we saw in 2022. So workers are marginally more confident, but nowhere near the 'Great Reshuffling' levels. Luna: And layoffs remained low — 1.5 million, basically flat. So the story is: companies are trying to hire, but they're not finding the right people, and they're not firing the people they have. Lucas: That's the picture. Now, what does this mean for the Fed? They're watching labor market tightness because it feeds into wage inflation. The employment cost index has been sticky around 3.5 percent year-over-year. Luna: And with core PCE still at 3.3 percent, the Fed has to balance that against the fact that job openings are rising again. That argues against rate cuts in the near term. Lucas: Right. The futures market is pricing in a 60 percent chance of a cut at the September meeting, but this JOLTS number probably pushes that probability down. The Fed wants to see sustained softening in the labor market before they move. Luna: But there's also the Iran factor. Energy costs are up, headline inflation in the euro zone hit 3.2 percent this week partly because of that. Here, the breakeven inflation rate actually dipped slightly to 2.39 percent, but that might be a lag. Lucas: Right, the ten-year breakeven is a market-based measure that can move fast. It fell two basis points this week, but that could be noise. The real worry is that if energy prices stay elevated, it could feed into core inflation through transportation and manufacturing costs. Luna: So we have this two-speed economy again: the labor market is tight in pockets, but not uniformly. And inflation is sticky but not accelerating. The Fed is stuck. Lucas: They are. And I think the key insight from this JOLTS report is that the level of openings — 7.6 million — is still historically high. Pre-pandemic, we were at 7 million on a good day. So the labor market is still tight by any historical standard. Luna: But the composition matters. If those openings are in sectors that are less productive or have lower wages, the inflationary pressure might be less than if they were in high-wage sectors. Lucas: That's a good point. The professional services openings are generally higher wage, but the leisure and hospitality ones are lower. So the wage mix could be moderating overall wage growth even as openings rise. Luna: Let's bring in the ADP report that came out today — private payrolls grew by 122,000 in May, stronger than expected. That suggests the job market is still adding jobs, just not at the torrid pace of 2023. Lucas: Yeah, 122,000 is a solid number. It's consistent with a labor market that's cooling gradually, not collapsing. And it backs up the JOLTS story: employers are still hiring, but they're being selective. Luna: So for the average job seeker, what's the takeaway? If you're in a sector where openings are growing, you have leverage. If you're in construction or manufacturing, it might be tougher. Lucas: Exactly. And if you're looking to switch careers, now might be the time to upskill into areas like healthcare or tech services, where demand is persistent. The Bureau of Labor Statistics projects healthcare occupations to grow 13 percent over the next decade. Luna: And for investors, this JOLTS data reinforces that the Fed won't cut rates soon. So bond yields are likely to stay elevated. The ten-year Treasury is at 4.49 percent today, up eight basis points over the past week. Lucas: Right. And the two-year is at 4.21 percent, so the curve is still inverted in the short end, but the long end is steepening. That's typical when the market expects the Fed to cut eventually, but not immediately. Luna: One thing I find interesting is that the JOLTS data often gets revised. Last month's number was revised up from 6.9 million to 7.0 million. So the trend is clearly upward, but we should be cautious about overinterpreting one month. Lucas: Absolutely. But the three-month average is now about 7.2 million, up from 6.8 million in the fourth quarter of 2025. So there's a genuine trend here. The question is whether it continues. Luna: And if it does continue, the Fed might have to revise its rate cut plans downward. But if openings start to fall again, that could open the door. So all eyes will be on the next JOLTS release and the nonfarm payrolls on Friday. Lucas: Speaking of which, if you're finding these deep dives into economic data useful — if walking through the economy with us has made something click — we want to keep this show ad-free and accessible. Listener support is what makes that possible. If you're inclined, you can buy us a coffee at buy me a coffee dot com slash fexingo. It's a simple way to help us keep doing this. Luna: Yeah, it’s a small gesture that goes a long way. We really appreciate everyone who's already supported the show. It keeps us independent and focused on the data. Lucas: So back to the labor market. Friday's nonfarm payrolls report will be the next big test. Expectations are for around 180,000 jobs added. If we get a number significantly above that, it could solidify the case for the Fed to hold steady. Luna: And if we get a number below 100,000, that might reignite rate cut speculation. But given the JOLTS and ADP data, I think the risk is to the upside. Lucas: I'd agree. The labor market is showing resilience, but it's a patchwork resilience. Different sectors, different regions, different wage levels. That's the story of 2026 so far — an economy that's doing okay on aggregate, but with a lot of variation underneath. Luna: And as always, we'll be here to break it down when the data comes out. Thanks for listening.