U.S. job openings unexpectedly increased in August amid a surge in demand for workers in the professional and business services sector, pointing to a still-tight labor market that could compel the Federal Reserve to raise interest rates next month.
The jump reported by the Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday snapped three straight monthly declines in job openings. Employers were also holding on to their workers in August.
Nevertheless, the labor market continues to steadily move towards an environment where demand is in balance with supply. There were 1.5 job openings for every unemployed person in August and the quits rate was unchanged. The Fed held rates steady last month but signaled a hike by the end of this year.
“One of the top items the Fed wants to see is labor supply match labor demand, and the economy is not quite there yet,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.
Job openings, a measure of labor demand, were up 690,000 to 9.610 million on the last day of August. Data for July was revised higher to show 8.920 million job openings instead of the previously reported 8.827 million. Economists polled by Reuters had forecast 8.800 million job openings in August.
There were an additional 509,000 open positions in the professional and business services, while vacancies increased by 96,000 in the finance and insurance sector. State and local government education had 76,000 more openings.
Unfilled positions increased by 59,000 in the nondurable goods manufacturing industry and the federal government had an additional 31,000 openings.
The job openings rate increased to 5.8% from 5.4% in July. Hiring increased by only 35,000 to 5.857 million, indicating that worker shortages was a major constrain. The Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range since March to quell demand.
Soon after the release of the JOLTS report, financial markets dialed down expectations that the U.S. central bank would keep rates unchanged at its Oct. 31-Nov. 1 policy meeting, according to CME Group’s FedWatch tool.
U.S. stocks extended losses on the data. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
The report showed layoffs dipping 1,000 to 1.680 million, keeping the layoffs rate at 1.1%. Layoffs and discharges decreased in state and local government, excluding education, but rose in state and local government education.
Quits rose 19,000 to 3.638 million, ending two consecutive months of decreases. The quits rate, viewed as a measure of labor market confidence, was unchanged at 2.3%. Economists said that data bodes well for keeping wage inflation contained.
Quits were led by the accommodation and food services sector, where resignations rose 88,000. There were also notable increases in finance and insurance, state and local government, excluding education, as well as arts, entertainment and recreation, which was probably related to labor unrest in Hollywood. There was a decline in resignations in the information industry.