Job openings have plummeted by more than 1.1 million, according to the United States Job Openings and Labor Turnover Survey (JOLTS). Ordinarily, this would be a sign of trouble for Americans. However, higher unemployment means everything is going as planned for Federal Reserve Bank Chair Jerome Powell during this high inflationary period.
The recent JOLTS report cites that job openings have plunged to 10.1 million. The decline in open job opportunities also ushered in a spike in the unemployment rate to 3.7% from 3.5% in July.
Wall Street applauded the news of fewer jobs. The accompanying rally in stocks is a sign to investors that the Fed is achieving its goal and may soon ease up on the interest rate hikes and other measures intended to mitigate the economy.
Less Spending, Fewer Workers
Runaway inflation is viewed as anathema to the economy. It diminishes wealth and the quality of life for families, as prices of goods and services skyrocket. To whip inflation, Powell’s policy is to depress the economy. One of the ways is to hike interest rates; another is to remove all the prior stimulus programs and substitute more austere measures.
Another part of the Fed’s program is to create job losses. The rationale behind this is that as people lose their jobs, they won’t spend as much and, at scale, the economy will contract.
The Salary-Wage Spiral
The U.S. has a tight job market with companies in great need of workers. With a high demand for employees, wages increase as companies compete against each other to find workers. This upward wage spiral enhances inflation, which is against the policy of the Fed. The JOLTS data suggests that businesses may start tapping the brakes on hiring and consider layoffs to cut costs in an unpredictable time.
Job-Market Fallacies
The U.S. Department of Labor reports that there are 1.7 job openings for every unemployed person, down from a couple of months ago. This metric is misleading to Americans. Just because plentiful jobs are available doesn’t mean those roles directly correlate with the skills and background of every unemployed person.
Many of these jobs are open because they’re unappealing to job seekers. These are positions in retail, the food industry, warehouses, fulfillment centers and other front-line roles. The jobs don’t pay well, especially with inflation eating into people’s earnings. Workers want to hold out for finding better, higher quality opportunities with future growth potential.
The data ignores that the Labor Department’s household survey shows that there is an increase in people juggling multiple jobs to stay afloat and put food on the table. It’s questionable if the multiple jobs are counted as one role or many, which can distort the real numbers. There is a noticeable drop in full-time permanent jobs and an increase in part-time roles.
Unintended Consequences
There is a concern that the Fed may create unintended consequences. The quantitative tightening could cause a recession—or something worse. Its policies could potentially cause things to break, as there have already been rumors of investment banks Credit Suisse and Deutsche Bank having difficulties. Global growth is already slowing.
The September Jobs Report
Friday will offer greater clarity and insights into the health of the U.S. job market and economy with the release of the September jobs report by the Bureau of Labor Statistics.
Source: Forbes
