U.S. Federal Reserve Board Chairman Jerome Powell (Photo by Drew Angerer/Getty Images)
United States employers advertised 9.9 million job openings in February, according to the Job Openings and Labor Turnover Survey (JOLTS). The number is the lowest since May 2021, the U.S. Department of Labor reported Tuesday. Job openings are still lower than the record 12 million advertised in March 2022, but far ahead of the pre-pandemic levels of around 7 million.
The JOLTS data offers a pre-U.S. jobs report view of the labor force. The survey offers color on the number of job openings, new hires, people who quit their jobs or were laid off and the rate at which workers are hired or decide to leave the workforce. The data reflects what is happening in the labor market and trends to be aware of.
It is essential as the Federal Reserve Bank looks closely at the job market to determine interest rate hikes. While it may seem counterintuitive, the Fed needs to see job losses. When people lose their livelihoods, they tend to spend less, which dampens the economy and helps bring down inflation.
What We Can Learn From The JOLTS Report
The JOLTS report collects data from a sampling of around 16,000 establishments, including private businesses, government entities and nonprofit organizations. The data is also collected through a survey, covering a wide range of industries, ranging from manufacturing, retail and healthcare to finance.
Investors, politicians and economists closely scrutinize the report, as it offers crucial information about where the economy and job market are heading.
Job openings are an important indicator of labor market demand, as they reflect the eagerness of employers to hire new workers. A high level of job openings can suggest that employers are struggling to find workers with relevant skills, which can lead to upward pressure on wages. This would be bad news for workers, as the Fed would need to hike rates to cool down the marketplace. Conversely, low job openings may suggest employers are hesitant to hire, which can be a sign of economic uncertainty.
In the JOLTS report, job openings are reported as the number of job listings on the last business day of the month. The data is seasonally adjusted to account for employment and job turnover fluctuations throughout the year. The JOLTS report may be considered bullish for the stock market since fewer jobs are posted, and the Fed may hold off on further rate hikes.
There were 5.9 million unemployed Americans in February. The 9.9 million vacancies amounted to 1.7 available jobs for each unemployed person. This is a decline from a near-record 1.9 openings in January. The number of employees quitting jobs rose to 4 million from a 21-month low of 3.9 million the prior month, showing that some people are confident they can find better opportunities.
Once again, an anomaly occurs. The people who switch jobs do so to earn more money or get a hefty counteroffer to stay with their firm. However, this is considered bad news, as the Fed hopes the quitting pace will subside to dampen wage growth leading toward higher inflation.
The Federal Reserve worries that a tight job market will contribute to inflation, as employers feel pressure to raise wages to compete for workers. Consumers will then pay more for goods and services because compensation rises for workers. “The Fed’s policy rate is now set to a range of 4.5 to 4.75%, up from near zero a year ago,” the New York Times reported.
How The JOLTS Report Works
You should approach the JOLTS report with a bit of skepticism. The survey relies upon the U.S. Bureau of Labor Statistics collecting data points about job openings, employment, recruitment hires and separations from the payroll.
JOLTS defines “job openings” as all open positions, but not necessarily filled, on the last business day of the month. Relying upon job listings as a critical metric is problematic. Companies don’t just post a job when they want to hire. There are numerous scenarios when jobs are posted, but are not real.
Why Some Jobs Are ‘Fake’
When there are layoffs or it’s a challenging economic climate, some businesses will post jobs to create the appearance that the company is doing well and growing, while everyone else is floundering.
Many jobs are posted on the company website and end up on job aggregation sites. Time goes by and the company forgets to take down the role. It stays on the company site and an array of other job boards. To the job seeker, the roles look new, but they are months old, and most have been filled already.
Companies have the policy to post jobs online to promote diverse hires. They want to show that they are making a good-faith effort to find the best talent—whether promoting from within or through a job listing. Unscrupulous firms use this as cover to hire someone they already know they want to hire. The job posting creates a false impression that it is a fair and open hiring process.
The company can gain a sense of the marketplace by posting phantom jobs. By the responses, they can determine how much money other places offer or whether the role is hot. If the company is looking to downsize or cut a few jobs, the phony roles can provide insight into how hard it would be to find a replacement and at what compensation level.
Companies also place phantom job ads to build a pipeline of candidates for the future. Right now, they may have no interest in interviewing or hiring a person.
Moreover, when people quit, the remaining workers must pick up the slack. They are forced to work longer hours without any pay increase. Then, they start complaining about why the company isn’t actively looking to fill the vacancies. To appease the remaining staff, the company places ads without any intention of finding a replacement. They are merely appeasing the workers.
Lastly, interviewers may actually invite people to interview based on the sham job listing. However, there is no intention of hiring the person. The company has someone picked out already. It may be an internal candidate that a senior executive has handpicked for the role. To orchestrate it to seem that the interview process is fair, the unsuspecting applicant doesn’t stand a chance, as the decision was already made, and you’re just part of the charade.
