The US labor market remains solid; manufacturing picks up momentum


Signage for a job fair is seen on 5th Avenue in Manhattan, New York, U.S., September 3, 2021. REUTERS/Andrew Kelly

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  • Job postings fall by 455,000 to 11.4 million in April
  • Hirings are down, layoffs fall to an all-time high
  • Manufacturing activity picks up in May

WASHINGTON, June 1 (Reuters) – U.S. job openings fell in April but remained at significantly high levels, suggesting wages would continue to rise as companies jostle for workers and would help keep inflation uncomfortably high for some time.

The Labor Department’s Job Openings and Rotation Survey, or JOLTS report, on Wednesday also showed layoffs at a record high, underscoring the tightness of the labor market. The Federal Reserve, struggling to bring inflation back to its 2% target, is trying to realign labor supply and demand without pushing the unemployment rate too high.

So far, there are few signs that the US central bank’s aggressive monetary policy is dampening demand across the economy. Factory activity picked up in May as demand for goods remained strong, other data showed. The reports further eased fears of an impending recession, stoked by rising interest rates and tightening financial conditions.

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“Today’s reports show that the economy is not slowing materially and the labor market remains very strong,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Job postings, a measure of labor demand, fell by 455,000 to 11.4 million on the last day of April. Data for March has been revised up to show a record 11.855 million vacancies instead of the 11.5 million previously reported. April’s job postings were in line with economists’ expectations.

Vacancies in the health care and social assistance industry fell by 266,000. There were 162,000 fewer vacancies in the retail sector, while vacancies in manufacturing accommodation and food services decreased by 113,000.

But the transportation, warehousing and utilities sector had an additional 97,000 unfilled jobs. Job openings increased by 67,000 in non-durable goods manufacturing, while durable goods manufacturers had 53,000 more vacancies.

The job creation rate slipped to 7.0% from 7.3% in March.

Fed Chairman Jerome Powell last month described job vacancies as “extraordinarily high” and said “there is a pathway by which we could have subdued demand in the labor market and therefore make reduce vacancies without increasing unemployment”. The unemployment rate remained at a two-year low of 3.6% in April.

The Fed has raised its key rate by 75 basis points since March. It is expected to raise the policy rate by half a percentage point at its June and July meetings.

In April, there were 1.92 job openings for every unemployed person, down from 2.0 in March. Economists said it was possible for companies to post job vacancies on multiple sites, but still maintain the listings even when the position has been posted.

“Nevertheless, underlying the huge gap between openings and hirings as well as the gap between openings and unemployed is the tight labor market,” said Sophia Koropeckyj, senior economist at Moody’s Analytics at West Chester, Pennsylvania.

Hiring fell by 59,000 to 6.586 million. This left the hiring rate unchanged at 4.4%. There were 73% more job offers than hires. Even taking into account the unemployed who want to work but are not looking for work, the gap between available jobs and available workers remains significant. The job-worker gap fell to a still high 3.3% of the labor force, from 3.6% in March.

“The gap remains near its highest level in postwar U.S. history, suggesting that wage growth will remain firm until further improvements in labor supply. and the normalization of job vacancies bring the labor market back into equilibrium,” Goldman Sachs economists wrote in a note.

Layoffs and layoffs fell by 170,000 to an all-time low of 1.246 million, mostly concentrated in small businesses. Resignations remained high, with 4.424 million resignations, little change from March. Most of the resignations were from small businesses.

Wall Street stocks were down. The dollar appreciated against a basket of currencies. US Treasury prices fell.

BLOWS

HIGH DEMAND FOR GOODS

In a separate report on Wednesday, the Institute for Supply Management (ISM) said its national factory activity index rebounded to 56.1 last month from 55.4 in April. A reading above 50 indicates an expansion in the manufacturing industry, which accounts for 12% of the US economy.

Economists had expected the index to fall to 54.5. The survey followed a report released last Friday showing that consumer spending rose sharply in April. The nation has been gripped by fears of an economic slowdown due to Fed rate hikes, rising Treasury yields and falling stock prices.

ISM Manufacturing PMI

Demand for goods remains resilient even as spending shifts to services like travel, restaurants and recreation. Spending on goods jumped as the COVID-19 pandemic restricted travel. Read more

The six largest manufacturing industries – machinery, computer and electronic products, food, transport equipment, petroleum and coal as well as chemicals – recorded moderate to strong growth.

Manufacturing remains constrained by tangled supply chains, which have been further entangled by Russia’s unprovoked war on Ukraine and new shutdowns in China under Beijing’s zero COVID-19 policy.

Transportation equipment makers said the semiconductor shortage was “worsening due to China’s COVID-19 lockdowns.” Manufacturers of miscellaneous goods reported that “supply chain issues are forcing us to significantly extend our delivery times.”

“Between supply chain disruptions and continued strong demand, inflationary pressures are bound to linger,” said Isfar Munir, an economist at Citigroup in New York.

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Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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