Latest / The Macro Memo with Fexingo: Daily Conversations on Inflation, GDP, and Federal Reserve Policy / The Job Openations Surge That Changes Everything
Transcript
- Lucas: So the JOLTS report dropped a couple of days ago, and the headline number is a showstopper — 7.6 million job openings in April, the highest in nearly two years. That's up from 6.9 million in March, a jump of about 731,000 openings in a single month. Luna: That's a massive move. I mean, we've been watching openings drift lower for over a year, and then suddenly this. Lucas: Exactly. And the immediate read from a lot of analysts was — hey, the labor market is still red hot, the Fed can't cut rates. But I think that's the wrong takeaway. The details tell a more complicated story. Luna: Okay, so walk me through the details. What jumped, and what didn't? Lucas: Sure. The big increase was concentrated in a few sectors. Leisure and hospitality added about 200,000 openings. Retail trade added another 150,000. Professional and business services — that's things like temp agencies and consulting — added over 250,000. Luna: So it's not broad-based. It's a lot of the lower-wage, higher-turnover industries. Lucas: Right. And here's the thing — the quits rate stayed flat at 2.2 percent. That's historically low. In the 'great resignation' days in 2022, quits were over 3 percent. People aren't leaving their jobs because they're not confident they can find a better one. Luna: So openings are up, but quits are down. That sounds like employers are posting jobs they can't fill, not that they're actually hiring. Lucas: Bingo. That's the mismatch story. There are 8.2 million unemployed workers, according to the April data, and 7.6 million openings. On paper, that's close to balance. But the skills and locations don't line up. So you get this weird dynamic where there are plenty of openings but hiring is sluggish. Luna: And that's the 'job openations' thing that's been floating around on Twitter — the idea that openings are a noisy indicator. You can have a surge without it meaning the economy is overheating. Lucas: Exactly. And the Fed knows this. Chair Powell has mentioned several times that they look at the whole suite of labor market data, not just openings. The quits rate, the hiring rate, the wage growth numbers. Speaking of which, average hourly earnings in April were up 4.1 percent year-over-year — that's above the pre-pandemic trend, but it's been trending down from the 5 percent plus we saw in 2023. Luna: And then we got the ADP private payrolls report yesterday — 122,000 jobs added in May, which was actually stronger than expected. So that suggests the hiring side is still chugging along, even if openings are noisy. Lucas: Right. But 122,000 is not a boom number. That's roughly trend or slightly below. So when you put it all together — the JOLTS surge in low-wage sectors, low quits, modest payroll growth, unemployment at 4.3 percent and flat — it looks less like overheating and more like a labor market that's rebalancing in a weird, uneven way. Luna: So what does this mean for the Fed? They've cut rates twice this year already, and the market is pricing in maybe one more cut in the second half. Does the JOLTS number change that? Lucas: I don't think it changes the trajectory. The Fed's focus has shifted from labor market to inflation. Core PCE is still sticky at 3.3 percent. The Iran conflict is pushing energy costs up — euro zone inflation just hit 3.2 percent partly because of that. And the ten-year break-even is at 2.38 percent, which is above the Fed's target. So the Fed is going to be cautious. Luna: But if the labor market is actually softer than the openings number suggests, then maybe they worry less about wage inflation and more about a sudden slowdown. Lucas: That's the risk. If you look at the quits rate and the hiring rate, they're both at levels that historically have been associated with a cooling economy. The JOLTS spike could be a lagging indicator — employers posting jobs out of habit, not because they're desperate. And if demand weakens, those openings will vanish quickly. Luna: So the JOLTS number might actually be a reason to cut rates faster, not slower. Lucas: That's the bull case. But the Fed is data-dependent, and they've been burned by false signals before. Remember last year when openings dropped but the economy kept growing? They're not going to overreact to one month. Luna: And speaking of the economy, the GDP data for the first quarter showed real growth at 1.6 percent annualized. That's not booming either. Lucas: No, it's not. And the Atlanta Fed's GDPNow for Q2 is tracking around 2.3 percent. So we're in this muddle-through zone — not recession, not boom. And in that environment, a surge in low-wage job openings might just be noise. Luna: You know, it's funny — we talk about the data all day, and sometimes I think the real story is how hard it is to read the economy in real time. Every number gets spun every which way. Lucas: That's actually why we do this show. Trying to make sense of the noise. If walking through the economy with us has made something click for you, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it really does make a difference. We don't run ads, so listener support is what keeps us independent. And we appreciate it. Lucas: Alright, back to the data. One more thing I want to flag — the quits rate by industry. In leisure and hospitality, quits were actually up a bit, which makes sense because those workers have options. But in manufacturing and construction, quits are at multi-year lows. That suggests those sectors are feeling the pinch from higher rates. Luna: So the story is bifurcated. Services are still hiring, goods-producing sectors are tightening. Lucas: Exactly. And that's the kind of detail you miss if you only look at the headline. So the JOLTS surge — real, but not a sign of a booming labor market. More like a signal of mismatch and sectoral shifts. Luna: So what's the one takeaway for our listeners? Something they can use. Lucas: I'd say this: don't let a big headline number fool you. The labor market is not as tight as the JOLTS headline suggests. The quits rate is a better pulse. And right now, the pulse says workers are cautious. That's something the Fed is watching closely. Luna: And we'll get the official May jobs report from the Bureau of Labor Statistics on Friday. That's going to be the real test. Lucas: Absolutely. If payrolls come in around 150,000 or below, and unemployment ticks up, then the JOLTS spike will look even more like an outlier. And the market will start pricing in a September cut more aggressively. Luna: We'll be back tomorrow to break it down. Until then, keep your eyes on the quits rate, not just the openings. Lucas: Good advice. Alright, Luna, thanks as always. Luna: Thanks, Lucas. Talk to everyone tomorrow.