The number of vacancies in the US was stable in September
Why it matters: The Fed is watching for signs of a soft landing.
The Federal Reserve is closely monitoring vacancies to understand whether the economy is running too hot. Since March 2022, the Fed has been trying to combat inflation by raising interest rates to the highest level since 2001.
The Fed has remained committed to achieving a 2 percent annual inflation target without causing a significant spike in unemployment — a combined result known as a “soft landing.”
Fed officials are expected to maintain a target range of 5.25 percent to 5.5 percent for rates at their meeting on Wednesday. The general trend of declining vacancies is a sign that interest rate increases have cooled the economy, experts say.
The number of vacancies, which reached a record of more than 12 million in March 2022, has fallen, as have the number of layoffs, while the number of divorces has remained flat. Because the number of vacancies increased slightly in September, the number of vacancies per unemployed person remained the same at 1.5, the same as in August.
Less turnover in the labor market indicates that rate increases are having an effect, said Julia Pollak, chief economist at job search website ZipRecruiter. ZipRecruiter’s latest survey of new hires found that the number of new hires receiving a raise, signing bonus or being hired for their new job declined.
Background: ‘More wood to chop’ for the Fed.
Vacancies are still much higher than before the pandemic, and the number of unemployed per vacancy is much lower. Both are signs of a tight labor market.
Inflation also remains above the Fed’s 2 percent target. The Fed’s preferred measure of inflation has fallen by nearly four percentage points since the summer of 2022 to 3.4 percent.
“The Fed’s primary focus remains inflation,” said Sarah House, a senior economist at Wells Fargo. “They read the economy through the lens of ‘What does this mean for the future path of inflation?’”
According to Stephen Juneau, an economist at Bank of America, the Fed still has “more wood to chop.” His team expects the Fed to raise rates again in December to achieve a soft landing.
Economic growth accelerated in the third quarter, and another measure of wage growth grew faster than expected over the summer. The 10-year U.S. Treasury yield, a key measure of long-term borrowing costs that underpins almost everything in the economy, has reached its highest level since 2007 as growth prospects have improved.
What’s next: October’s jobs report on Friday.
Wednesday morning’s report heralded several important days in economic news. After Fed officials meet to decide whether to raise rates, the October jobs report will be released Friday by the Department of Labor.
The data is expected to show that hiring has slowed, with 180,000 jobs added, according to Bloomberg’s survey of economists, up from 336,000 in September. The unemployment rate is expected to rise to 3.9 percent after remaining stable at 3.8 percent in September.