US Job Openings Post Surprise Increase, Keeping Pressure on Fed
Comment of the Day

November 01 2022

Commentary by Eoin Treacy

US Job Openings Post Surprise Increase, Keeping Pressure on Fed

This article from Bloomberg may be of interest to subscribers. Here is a section:

The surprise pickup in vacancies highlights unrelenting demand for workers despite mounting economic headwinds. The persistent imbalance between labor supply and demand continues to underpin robust wage growth, adding to widespread price pressures and reinforcing expectations for yet another large rate hike on Wednesday.

The latest increase in openings erased much of August’s slide, which, at the time, had suggested a notable moderation in labor demand.

“After the shock of last month’s report, the September JOLTS data is returning to a familiar story: demand for workers remains robust,” Nick Bunker, head of economic research at Indeed Hiring Lab, said in a note. “By all the key metrics in this report, the labor market is resilient.”

Eoin Treacy's view

There is no easy way to address a shortage of workers because someone is going to be upset by whatever solution is suggested. Immigration is the most expedient but it comes with significant political pitfalls and will invariably change the culture of wherever migrants congregate most.

Legal immigration has fallen from over 1 million people a year in 2016 to less than 200,000 last year and since it is a hot button election political topic, there is no appetite to address it. Meanwhile, illegal immigration is surging with millions of people walking over the border in the last few years but these people are not counted in official statistics.

At the same time the baby boomer generation rider en masse during the pandemic and the jump in asset prices made that transition easier. The only way to encourage those people back into the workforce would be to raise the retirement age, reduce benefits or depress asset prices; none of which is politically or economically desirable.

The last alternative would be to contract the economy so the number of jobs comes close to the available workforce. That takes the decision away from politicians which is really what the Fed’s independence is all about.

The fact that consumer spending adjusted for inflation is back to trend suggests consumers have been able to sustain spending despite inflation. Therefore the effects of monetary tightening have not been felt yet. It’s inevitable that raising rates by several hundred basis points and inverted yield curves will have an effect eventually but it is not apparent in economic statistics just yet.

Back to top

You need to be logged in to comment.

New members registration