April’s US Job Opening and Labor Turnover Survey (JOLTS) reported a decline in job openings to 8.06 million from 8.355 million, the lowest level since February 2021. Bankrate Senior Economic Analyst Mark Hamrick joins Wealth! to break down the print and explain what it means for the economy’s struggle with inflation.
“I think this is pretty consistent with what we expect in the context of a job market and a broader economy that are normalizing after the disruption, the volatility, the distortions associated with the pandemic,” Hamrick explains. He notes that in February 2021, the economy was rushing to reopen, and what we’re seeing now is a relatively healthy stabilization.
As for the Federal Reserve’s next interest rate decision, Hamrick says the Fed’s current focus “is almost exclusively on the stable prices piece,” as overall inflation remains above its 2% target. He notes that several more months of data is needed before the Fed can be confident in deflation, and adds that “the Fed does not believe that wage gains have been a primary cause of the inflation that we have seen.” He instead points to supply chain disruptions as the principal source of inflation.
Hamrick expects one to two rate cuts by the end of the year, warning, “We have a long way to go before we get there.”
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This post was written by Melanie Riehl
Video Transcript
We got a fresh read on the labor market this morning, April job openings falling to their lowest level since February 2021.
Meanwhile, the number of hires didn’t change much.
This is all a sign that in some sectors, employers are still on boarding new workers, but the number of jobs available in aggregate are continuing a downward trend.
So what does this mean for everyday workers here with more?
We’ve got Mark Hambrick, who’s the bank rate, senior economic analyst mark.
Great to have you here.
Just want to get your read through on what we saw come through in jolts this morning.
Good morning, Brad.
Great to be with you.
I think this is pretty consistent with what we expect in the context of a job market and a broader economy that are normalizing after the disruption, the volatility, the distortions associated with the pandemic.
And so you referenced there, the number of job openings is the lowest since early February or early 2021.
Well, what was going on then?
It was the rush to reopen the economy in the months before that.
And so we had job openings topping 12 million, which you know, it was mind blowing then it’s still mind blowing now.
But the number of job openings is still above pre panic levels, which is healthy, I think.
And, uh, we’ll see just how this normalization or perhaps slowing process works its way through the system as we get into the second half of the year.
You know, Mar, and you laid it out.
Well, I mean, this week we’ve got a ton of data that’s coming forward on the employment situation front in totality, of course, jolts just being today ad p private payrolls tomorrow and then it all leads up to Friday’s big jobs report as well for the trend that we’re seeing really emerging here.
What is the fed gonna be looking forward to, to, to really shift the tenor of their conversation towards a cut?
Well, I don’t think they’re going to shift the tenure of their conversation.
The conversation remains the same attentive to their dual mandate with the major focus being inflation, with prices too high and inflation uh above where they want it to be.
And of course, if we were to see a significant weakening in the job market, which we have not seen with the unemployment rate below 4% for more than two years, then let’s think about the dual mandate, stable prices, maximum employment, then they start to be a little more concerned about the maximum employment piece of that.
But for now, the focus is almost exclusively on the stable prices piece.
And you know, we have to get through, I would say several months of data for officials to be attaining greater confidence that inflation is coming down closer to their 2% target.
Certainly.
And, and all these things in mind, how important is the wage data that we’re going to get over the course of this week to that inflationary calculus that the fed is running.
Well, of course, as you were beginning to ask that question, I was going to say, well, it’s incredibly important to the workers and even the employers who have to consider whether to provide those pay raises.
But let’s sort of hearken back to the fact that first of all, wage gains have been moderating as with the strength of the job market overall.
And the fed does not believe that wage gains have been a primary cause of the inflation.
We have seen.
We all I would say, I want to say we all know, but I’m not sure everybody believes that that the source of inflation has principally been the supply chain disruptions.
And then of course, adding literally insult and injury and injury to the whole situation was Russia’s invasion of Ukraine thinking about how that disrupted prices in a globally connected economy.
But I, you know, ultimately, these things are all normalizing.
I think what of course is still the real problem at hand is that prices remain elevated.
And so even we could even though we talk perhaps until the would be cows come home about the level of inflation coming down.
People are agitated and financially pressured by the reality that prices are still high and the fed really can’t do too much about the latter.
You know, it, it’s interesting mark higher for longer rates is what we’ve continued to hear and have to really wrap our minds around.
How, how much longer are we talking with that in mind?
I mean, we’ve heard some economists change their projections for this year from what we were talking about coming into the start of the year.
It sounded like five or six rate cuts down to one or two, maybe even none.
Yeah.
Uh obviously, you know, I think I’d be foolish to try to get over my skis on making a prediction about what inflation is going to look like 456 months from now.
But, you know, I do think the consensus is probably about as close as you can get to right right now where, you know, maybe you get something on the order of one or two rate cuts by the end of the year, but we have a long way to go before we get there.
But I think higher for longer has more relevant meaning to perhaps our viewers and essentially all the stakeholders in the economy.
And I’m going to focus primarily on consumers for this and that and who are ultimately borrowers and savers as well.
And that is that higher for longer can also mean that we’ll not get back to the extremely low levels of interest rates that we saw not only immediately after the global financial crisis, but during the worst economic parts of the uh pandemic.
And Chairman Paul has said that that’s his expectation as well.
And so what does that mean?
And just as much as those times were in a sense, historically distorted, perhaps normalization means that we have higher rates than what we had seen during those crises and really for the balance of the 20 tens.
And so that means that, you know, perhaps we shouldn’t expect mortgage rates at 3% and just barely above, we should, didn’t expect uh borrowing rates to be as low as they were more broadly.
But also we may see uh better yields on savings than what we saw during those low interest rate years.
When essentially the unintended consequences of that low interest rate policy was that savers were the unintended casualties of that Mark.
Always great perspective and inside Mark Hamrick bank rates, senior economic analyst.
Great to see you, Mark.
Thank you, Brad.
Great to be with you.