According to a recent report by the government, America's employers posted 9 million job openings in December, signaling the continued resilience of the U.S. job market despite the challenges posed by higher interest rates. This reflects an increase from November's 8.9 million job openings, which was revised upward in the report.
While job openings have gradually decreased since hitting a record high of 12 million in March 2022, they still remain at historically high levels. Prior to 2021, monthly job openings had never surpassed the 8 million mark. This data suggests that despite some fluctuations, the job market in the United States remains robust.
However, a cautious note is sounded as layoffs rose in December. Additionally, the number of Americans voluntarily quitting their jobs, an indication of confidence in finding better positions, dipped to the lowest level since January 2021.
The strength of the U.S. economy and job market has been surprising, given the impact of higher interest rates. The Federal Reserve has increased its benchmark interest rate 11 times since March 2022, reaching a 23-year high of around 5.4%. These higher rates have translated into elevated borrowing costs for both consumers and businesses.
The Federal Reserve's policymakers believe that cooling down the job market from its red-hot levels in 2021 and 2022 will reduce the pressure on businesses to raise salaries in order to attract and retain employees. This, in turn, prevents the passing on of these costs to customers through higher prices.
The effect of higher interest rates on hiring has been evident, with a slowdown in employment growth. However, the pace of job creation remains relatively healthy. Last year, U.S. employers added 2.7 million jobs, a decrease from the 4.8 million jobs added in 2022 but still a significant number. In 2021, a record-breaking 7.3 million jobs were created.
When the government releases its January employment report later this week, it is expected to show an addition of 177,000 jobs, according to a survey conducted by the data firm FactSet. This solid figure further supports the notion that the job market is experiencing a controlled cooling process, primarily through a reduction in job openings.
Despite some high-profile layoffs, the overall number of job cuts across the economy remains relatively low. The unemployment rate has maintained a level below 4% for an impressive 23 consecutive months, the longest such streak since the 1960s. Additionally, the number of people applying for unemployment benefits, which serves as a gauge of layoffs, has remained unusually low.
Overall, this report indicates that while the U.S. job market may be experiencing a slight cooling effect, it remains in a healthy state. The high number of job openings, coupled with low unemployment rates and minimal layoffs, suggests that the U.S. economy continues to exhibit resilience and stability in the face of various challenges, including higher interest rates.
