April Job Openings Plunge to New Lows, Raising Economic Concerns

April Job Openings Plunge to New Lows, Raising Economic Concerns 

After several months of uneventful JOLTS reports, Janet Yellen's preferred labor market indicator took a sharp turn for the worse. In March, job openings unexpectedly dropped by 325,000, bringing the total down to 8.5 million, the lowest in three years. The latest April update from the BLS revealed an even more significant decline.

According to the April JOLTS report, job openings fell by 296,000 from a downward revised 8.355 million in March (the March drop was adjusted to 458,000) to 8.059 million. This was far below the expected 8.350 million and the lowest since February 2021, when the figure last dipped below 8 million.

The 291,000 shortfall compared to the expected 8.350 million was substantial, though not as severe as the revised 325,000 miss from the previous month. However, these consecutive large misses are the biggest since mid-2023.

The Department of Labor reported that job openings in April decreased in health care and social assistance by 204,000 and in state and local government education by 59,000, but increased in private educational services by 50,000.

On a brighter note, the record drop in construction job openings from 456,000 to 274,000 in March (a 182,000 decline) was revised upward to 346,000. However, April saw another drop to 338,000, though not as steep. Despite this, the two-month decline in construction job openings remains the largest on record.

In the broader context, in March, job openings exceeded the number of unemployed workers (6.492 million) by 1.567 million, down from the previous month's 1.926 million and the lowest since June 2021.

In April, the ratio of job openings to unemployed workers fell to 1.24 from March's 1.30, the lowest since June 2021, returning to pre-COVID levels.

Examining the number of quits, an indicator of labor market strength reflecting workers' confidence in finding better wages, reveals that after an unexpected drop of 118,000 (revised from a 198,000 plunge) in March, quits rose by 98,000 in April to 3.507 million, a level seen in pre-COVID times.

Despite stagnant job openings, hires remained flat at around the mid-5 million level, rising slightly to 5.640 million in April from 5.617 million in March. This figure is close to the lowest since January 2018 (excluding the COVID-19 plunge) and is below pre-COVID levels.

Lastly, regardless of the reported data, it is important to note that much of it is based on estimates. The BLS admits that response rates to its labor surveys, including the JOLTS report, are at a record low of around 33%. This means more than two-thirds, or about 70%, of the final job openings number is estimated.

Given the current political climate, with President Biden needing to project a strong labor market amidst other economic challenges, it is up to the readers to judge if the Labor Department is filling in gaps with stronger or weaker estimates. Historical trends suggest these numbers are often revised downward in subsequent reports.