Job openings unexpectedly rose in September, a discouraging sign for the Federal Reserve, which has been hoping its aggressive efforts to tighten monetary policy would cause the number to fall as a step toward lowering inflation.
Openings across all sectors increased to 10.7 million in September, up from 10.3 million the month before, according to data released on Tuesday by the Bureau of Labor Statistics.
The largest increases in job openings were in accommodation and food services; healthcare and social assistance; and transportation, warehousing, and utilities. Hires fell a bit in September, although companies laid off fewer workers. The rate of people quitting their jobs was about the same as the month before.
Job openings coming in hot is not good news for the Fed, which has been on an aggressive rate-hiking cycle in order to bring down the country’s towering inflation. High job openings can indicate that the labor market is still robust, and thus the rate hikes haven’t begun to eat into that so much as of yet.
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Fed Chairman Jerome Powell recently said that openings “need” to come down. The Fed has already aggressively hiked rates throughout the year, so Tuesday’s numbers are likely surprising to the central bank and many economists.
“Job openings are incredibly high relative to the number of people looking for work. It’s plausible, I’ll say, that job openings could come down significantly — and they need to — without as much of an increase in unemployment as has happened in earlier historical episodes,” Powell said at a press conference after the last Federal Open Market Committee meeting.
The Tuesday report comes as the committee holds its November meeting to determine to what degree it should hike rates. The two-day meeting will conclude on Wednesday with an announcement and another press conference by Powell.
In September, the central bank decided to raise its interest rate target by 75 basis points, the third such recent massive hike.
Most economists and Fed watchers are betting that the central bank will announce another 75 basis point hike on Wednesday, although some believe the target rate might be hiked by just 50 basis points or pushed up by 100 basis points.
As of Tuesday, investors assigned about a 86% chance of a 75 basis point hike, according to CME Group’s FedWatch tool, which calculates the probability using Fed fund futures contract prices.
There is fear that if the Fed drives rates too high in response to inflation, it could knock the economy into a recession. Many economists are raising expectations for a recession to begin sometime next year.
Also top of mind for economists is Friday’s employment report. Throughout the year, monthly employment reports have come in strong, giving the Fed more ammunition to keep driving up rates to a historic degree.
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“Fed officials better hope for a weaker payroll jobs report on Friday for the month of October because looking back in the rearview mirror, job openings increased strongly at the end of September,” said Chris Rupkey, chief economist at Fwdbonds. “The good news of more job openings for everyone will be bad news for everyone if Fed officials become convinced they need to push interest rates even higher and faster than before.”
“It is a head-scratcher where you have to wonder whether 10 million job openings can stop a recession from coming,” he added.
