U.S. job openings hit 11-month low; quits rate stagnates

FILE PHOTO: A "Help Wanted" sign sits in the window of a shop in Harvard Square in Cambridge, Massachusetts, U.S., February 11, 2019. REUTERS/Brian Snyder/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings dropped to an 11-month low in February and hiring decreased, which could partially explain a sharp slowdown in job growth during that month.

Still, the labor market remains a pillar of support for the economy amid signs that activity was easing because of the fading boost from a $1.5 trillion tax cut package and the effects of interest rate increases over the last few years. The economy is also facing headwinds from slowing global growth and the United States’ trade war with China.

“The February job openings data reinforced that the labor market weakened in February but there isn’t any cause for concern,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Job openings, a measure of labor demand, tumbled by 538,000 to a seasonally adjusted 7.1 million, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS, report on Tuesday. The drop was the biggest since August 2015. The level was the lowest since March 2018.

Vacancies in the accommodation and food services industry fell by 103,000 jobs in February. There were 72,000 fewer job openings in the real estate and rental and leasing sector. Job openings in the transportation, warehousing and utility sector dropped by 66,000.

Nonfarm payrolls increased by only 33,000 jobs in February, the fewest since September 2017. The near-stall in job gains was partially blamed on colder weather and also viewed as payback after robust increases in December and January.

Job growth picked up in March, with the economy creating 196,000 positions, the government reported last Friday.

WORKERS STILL SCARCE

The drop in job openings in February likely does not change the theme of labor shortages in the economy. A survey of small businesses published on Tuesday found that just over a fifth of owners reported difficulties finding qualified workers as their “single most important business problem” in March.

According to the survey from the NFIB, 39 percent of small business owners reported job openings they could not fill in March. Thirty-three percent said they had openings for skilled workers and 14 percent have vacancies for unskilled labor.

Economists expect monthly job growth to average roughly 150,000 this year, stepping down from 223,000 in 2018.

“There are still millions of help wanted signs out there in the country so we hesitate to revise our outlook for the labor market overall,” said Chris Rupkey, chief economist at MUFG in New York.

The dive in job openings in February pushed down the vacancies rate to 4.5 percent from 4.8 percent in January. Hiring fell to 5.7 million in February from 5.8 million in the prior month. The decrease in hiring was led by the construction sector, where hiring fell by 73,000.

Hiring in the nondurable goods manufacturing industry dropped by 33,000 in February. Hiring by state and local government education departments fell 22,000.

The number of workers voluntarily quitting their jobs was little changed at 3.5 million in February, keeping the quits rate at 2.3 percent for a ninth straight month.

The quits rate is viewed by policymakers and economists as a measure of job market confidence. The worker reluctance to switch jobs is despite the tight labor market conditions that are steadily driving up wages.

“This is not as many quits as you would expect in such a tight labor market, when workers are in higher demand,” said Nick Bunker, an economist at Indeed Hiring Lab. “Though perhaps this isn’t surprising in the short term given that the ratio of unemployed workers to job openings has been rising.”

Layoffs increased in February, lifting the layoffs rate to 1.2 percent from 1.1 percent in January. There were increases in layoffs in the professional and businesses services, and healthcare and social assistance sectors in February.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. economy gains 313,000 jobs in February; wage growth slows

Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth surged in February, recording its biggest increase in more than 1-1/2 years, but a slowdown in wage gains pointed to only a gradual increase in inflation this year.

Nonfarm payrolls jumped by 313,000 jobs last month, boosted by the largest rise in construction jobs since 2007, the Labor Department said on Friday. The payrolls gain was the biggest since July 2016 and triple the roughly 100,000 jobs the economy needs to create each month to keep up with growth in the working-age population.

The labor market is benefiting from strong domestic demand, an improvement in global growth as well as robust U.S. business sentiment following the Trump administration’s $1.5 trillion income tax cut package that come into effect in January.

Average hourly earnings edged up four cents, or 0.1 percent, to $26.75 in February, a slowdown from the 0.3 percent rise in January. That lowered the year-on-year increase in average hourly earnings to 2.6 percent from 2.8 percent in January.

The unemployment rate was unchanged at a 17-year low of 4.1 percent in February for a fifth straight month as 806,000 people entered the labor force in a sign of confidence in the job market. The average workweek rebounded to 34.5 hours after falling to 34.4 hours in January.

With Federal Reserve officials considering the labor market to be near or a little beyond full employment, the moderation in wage growth last month did little to change the view that the U.S. central bank will raise interest rates at its March 20-21 policy meeting.

Slow wage growth, however, could temper expectations the Fed will raise its rate forecast to four hikes this year from three. There is optimism that tightening labor market conditions will spur faster wage growth this year and pull inflation toward the Fed’s 2 percent target.

“While the employment gains unequivocally suggest underlying strength in the economy, wage gains remain muted enough for the Fed to continue with an only gradual normalization of the policy stance. Stock markets are reacting accordingly,” said Harm Bandholz, chief U.S. economist at UniCredit Bank in New York.

Speculation that the central bank would upgrade its rate projections was stoked by Fed Chairman Jerome Powell when he told lawmakers last week that “my personal outlook for the economy has strengthened since December.”

While Powell said there was no evidence of the economy overheating, he added “the thing we don’t want to have happen is to get behind the curve.”

Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month and the unemployment rate falling to 4.0 percent. Average hourly earnings had been expected to increase 0.2 percent in February.

Data for December and January was revised to show the economy adding 54,000 more jobs than previously reported.

U.S. stock indexes opened higher after the data while prices of U.S. Treasuries were trading lower. The dollar was largely unchanged against a basket of currencies.

CONSTRUCTION SHINES

Some companies like Starbucks Corp and FedEx Corp have said they would use some of their windfall from a tax cut package to boost workers’ salaries. Walmart announced an increase in entry-level wages for hourly employees at its U.S. stores effective in February.

The employment report suggested the economy remained strong despite weak consumer spending, home sales, industrial production and a wider trade deficit in January that prompted economists to lower their first-quarter growth estimates. Gross domestic product estimates for the January-March quarter are around a 2 percent annualized growth rate. The economy grew at a 2.5 percent pace in the fourth quarter.

The full impact of the tax cuts and a planned increase in government spending has yet to be felt, and a robust job market could heighten fears of the economy overheating.

“The economy is simply too strong,” said Chris Rupkey, chief economist at MUFG in New York. “There’s no reason whatsoever for the Federal Reserve to have a stimulative monetary policy at this stage of the business cycle.”

Economists expect the unemployment rate to fall to 3.5 percent this year. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, was unchanged at 8.2 percent last month.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose three-tenths of a percentage point to a five-month high of 63.0 percent in February.

An even broader gauge of labor market health, the percentage of working-age Americans with a job, increased to 60.4 percent last month from 60.1 percent in January.

Employment gains were led by the construction sector, which added 61,000 jobs, the most since March 2007. Hiring at construction sites was likely boosted by unseasonably mild temperatures in February.

Manufacturing payrolls increased by 31,000 jobs, rising for a seventh straight month. The sector is being supported by strong domestic and international demand as well as a weaker dollar. Retail payrolls jumped by 50,300, the largest increase since February 2016.

The Labor Department said that was because on an unadjusted basis the sector hired fewer workers than usual for the holiday season and did not shed many jobs after the holidays. As a result, retail employment rose after the seasonal adjustment, the department said.

Government employment increased by 26,000 jobs last month, with hiring of teachers by local governments accounting for the bulk of the rise. There were also increases in payrolls for professional and business services, leisure and hospitality as well as healthcare and social assistance.

Financial sector payrolls increased by 28,000 last month, the most since October 2005.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)

U.S. job growth speeds up, unemployment rate falls

FILE PHOTO: Job seekers listen to a recruiter at the Colorado Hospital Association job fair in Denver, Colorado, U.S. on October 4, 2017

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in annual wage gains and surge in the number of people dropping out of the work force cast a cloud over the labor market.

Nonfarm payrolls increased by 261,000 jobs last month as 106,000 leisure and hospitality workers returned to work, the Labor Department said in its closely watched employment report on Friday. That was the largest gain since July 2016 but below economists’ expectations for an increase of 310,000 jobs.

Data for September was revised to show a gain of 18,000 jobs instead of a decline of 33,000 as previously reported. Some aspects of the report, however, were downbeat.

Average hourly earnings slipped by one cent, leaving them unchanged in percentage terms, in part because of the return of the lower-paid industry workers. That lowered the year-on-year increase to 2.4 percent, which was the smallest since February 2016. Wages shot up 0.5 percent in September, lifting the annual increase in that month to 2.9 percent.

Still, October’s job growth acceleration reinforced the Federal Reserve’s assessment on Wednesday that “the labor market has continued to strengthen,” and probably does little to change expectations it will raise interest rates in December. The U.S. central bank has lifted rates twice this year.

“The weakness in wages will not go unnoticed at the Fed, particularly for members that remained more concerned over the inflation outlook,” said Michael Hanson, chief U.S. economist at TD Securities in New York. “Overall, sustained job growth and labor market slack at pre-crisis lows keeps December in play.”

Although the unemployment rate fell to near a 17-year low of 4.1 percent, it was because the labor force dropped by 765,000 after a surprise jump of 575,000 in September.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell four-tenths of a percentage point to 62.7 percent.

Prices of U.S. Treasuries rose after the data. The dollar <.DXY> gained against a basket of currencies and stocks on Wall Street were largely flat.

 

LABOR MARKET TIGHTENING

The sharp moderation in job growth in September was blamed on hurricanes Harvey and Irma, which devastated parts of Texas and Florida in late August and early September and left workers, mostly in lower-paying industries such as leisure and hospitality, temporarily unemployed.

Economists, however, remain optimistic that wage growth will accelerate with the labor market near full employment. Last month’s one-tenth percentage point drop in the unemployment rate took it to its lowest reading since December 2000. The jobless rate is now below the Fed’s median forecast for 2017.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 7.9 percent last month, the lowest level since December 2006, from 8.3 percent in September.

Tepid wage growth supports the view that inflation will continue to undershoot the Fed’s 2 percent target and could raise concerns about consumer spending, which appears to have been largely supported by savings this year.

The economy grew at a 3.0 percent annualized rate in the third quarter. Growth has remained strong even as President Donald Trump and the Republican-led Congress have struggled to enact their economic program.

Republicans in the U.S. House of Representatives on Thursday unveiled a bill that proposed slashing the corporate tax rate to 20 percent from 35 percent, cutting tax rates on individuals and families and ending certain tax breaks. The plan has been met with opposition from small businesses, realtors and homebuilders.

A separate report from the Commerce Department on Friday showed the U.S. trade deficit increased 1.7 percent to $43.5 billion in September as rising exports were offset by a surge in imports. Exports, which were the highest since December 2014, are being buoyed by a weakening dollar and strong global growth.

Monthly job growth has averaged 162,000 over the past three months. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

The slowing job growth trend largely reflects employers’ difficulties in finding qualified workers. Some economists believe the impact of the hurricanes was still holding back employment growth.

Private payrolls surged by 219,000 jobs in October after falling by 3,000 in September. Manufacturing employment increased by 24,000 jobs. The retail sector lost 8,300 jobs last month.

Construction payrolls gained 11,000 in October, likely boosted by hiring related to the clean-up and rebuilding efforts in the wake of the hurricanes. There were increases in professional and business services payrolls. Healthcare employment also rose last month.

 

(Reporting by Lucia Mutikani; Editing by Paul Simao)