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: The April JOLTS report landed Tuesday, and the headline number is pretty striking: 7.62 million job openings. That's the highest we've seen in nearly two years, and it's about 730,000 more than March. Luna: That's a big jump. And yet unemployment is still at 4.3 percent, hasn't budged. So the immediate reaction is — is the labor market suddenly heating up again? Lucas: Right, and that's the puzzle. If you just look at job openings, it screams tight labor market. But the quits rate is still below pre-pandemic levels, and hiring has actually slowed in some sectors. So the surge in openings is concentrated. Luna: Concentrated where? Because it's not across the board. Lucas: Exactly. The big driver is leisure and hospitality — restaurants, hotels, that whole category — which added about 200,000 openings. Then health care and social assistance also jumped. But manufacturing and retail trade? Flat to down. Luna: So it's not a broad-based recovery in labor demand. It's specific industries that still haven't fully staffed up post-pandemic. Lucas: That's the working theory. And the fact that unemployment hasn't moved suggests something else: workers aren't jumping ship. The quits rate is still around 2.2 percent, down from 3.0 at the peak in 2022. People are staying put. Luna: Which means the openings aren't being filled quickly. Employers are posting jobs, but maybe they're not finding the right candidates, or wages aren't high enough to attract them. Lucas: Yeah, that's the classic mismatch story. But here's where it gets interesting for the Fed. The effective Fed funds rate is at 3.63 percent right now, and core PCE is still sticky at 3.3 percent. If job openings surge, the fear is that wage pressure could keep inflation elevated. Luna: But if the quits rate is low, that suggests workers don't have as much bargaining power. You can't demand a raise if you're not willing to leave. Lucas: Exactly. So the traditional relationship — more openings equals faster wage growth — might be weaker now. The Fed's been watching the Beveridge curve, which plots job openings against unemployment. During the pandemic, the curve shifted out — meaning more openings for the same unemployment rate. But it's been shifting back in. Luna: And this JOLTS number — does it shift the curve back out? Or is it just noise? Lucas: One month doesn't make a trend. But it's worth noting that the 10-year breakeven inflation rate actually ticked down to 2.39 percent after the report. Markets seem to be taking it in stride. Luna: So the bond market isn't panicking. That's a signal that this might be a blip. Lucas: Could be. But there's another layer: the JOLTS data is notoriously noisy. The confidence intervals are wide. A 730,000 jump could be revised away. We saw that last year — big revisions. Luna: Right, so we shouldn't overreact. But it does complicate the narrative that the labor market is cooling enough for the Fed to cut. Lucas: It does. The Fed's next meeting is in two weeks. Markets are pricing in a hold, with a cut maybe in July. But if job openings stay elevated, and if the next CPI print doesn't cooperate, that timeline could shift. Luna: Speaking of not overreacting — you know, we try to keep this show free of ads and sponsor interruptions, just the data and the conversation. If you find that valuable, supporting us is easy. It's buy me a coffee dot com slash fexingo. Lucas: Yeah, that's a big part of why we can dive into stuff like the Beveridge curve without having to cut to a mortgage ad. Appreciate anyone who chips in. Luna: Alright, back to the data. So the quits rate is low, openings are high in specific sectors, and unemployment is flat. What does this mean for the average worker? Lucas: Good question. For someone in leisure and hospitality, there are more job postings, but they might not be getting hired quickly. For someone in manufacturing, it's a different story — fewer openings. So the experience is very uneven. Luna: And for the Fed, the key metric is wage growth. Average hourly earnings have been hovering around 4 percent year-over-year. That's above the level consistent with 2 percent inflation. Lucas: Right, productivity matters too. If productivity is strong, you can have higher wage growth without inflation. But Q1 productivity data was mixed. Nonfarm business productivity rose at a 1.2 percent annualized rate, which is solid but not stellar. Luna: So the Fed is stuck between a labor market that looks tight on openings but not on quits, and inflation that's proving stubborn. That's a tough spot. Lucas: It is. And there's another wrinkle: the Iran situation. The headlines this week are about escalating attacks and a ceasefire fraying. That's pushing energy costs higher — we saw euro zone inflation hit 3.2 percent partly because of that. Luna: And here at home, the average household is paying an extra $450 on gas and energy, according to recent estimates. That's a supply-side shock that the Fed can't fix with rate policy. Lucas: Exactly. So when you look at the JOLTS number in that context, it's not just about labor demand. It's about whether the economy can absorb higher energy costs without a slowdown. Luna: And whether the Fed can cut rates into that. Some argue they should, because core inflation is being driven by shelter and energy — things they can't control. Others say they need to keep rates high to prevent a wage-price spiral. Lucas: The camp that says cut — they point to the fact that the unemployment rate has been at 4.3 percent for three months now. That's up from 3.4 percent in early 2023. The labor market has clearly loosened. Luna: But job openings at 7.6 million — that's still well above the pre-pandemic level of about 7 million. So it's not loose by historical standards. Lucas: No, it's not. And that's why this data point matters. It could be the one that tips the Fed toward a longer pause. If April's JOLTS is revised up even further, or if May's numbers stay high, the case for a July cut weakens. Luna: So what should listeners watch for next? Besides the JOLTS revision. Lucas: Next up is the May CPI report, due June 11. That will give us a read on whether the sticky inflation is persisting. Also, weekly jobless claims — they ticked up to 215,000 last week, from 210,000. If that trend continues, it could signal softening. Luna: And the Fed's dot plot is coming at the June meeting. That will show where individual members see rates heading. Lucas: Right. So there's a lot of data in the pipeline. But for today, the takeaway is: one month of elevated job openings doesn't reverse the broader cooling trend, but it does remind us that the labor market is still resilient in spots. And that resilience makes the Fed's job harder. Luna: It's a reminder that the economy isn't a monolith. Some industries are hiring like crazy, others are pulling back. And the Fed has to navigate that. Lucas: Exactly. And we'll keep watching.