The last few months of jobs data from the US Labor Department paint a picture of a tight labor market, with the number of new jobs slowing down as unemployment fell to a long-term low. The department’s latest Job Openings and Labor Turnover Summary (or JOLTS report), released on Tuesday, shows that US employers posted more than 6 million job openings in April—the most since December 2000, when the government began tracking the data—but both hires and quits declined. The puzzling fall in the number of workers quitting their jobs may help explain why wages are not rising as fast as economists would expect in such a tight labor market, the Associated Press reports:
Some economists argue that slower pay raises suggest [employers] may not be so desperate after all. It’s easy to post jobs on a website, but employers may not follow through by recruiting more and offering higher pay. One trend supporting that view is a decline in the number of people quitting, which slipped 3.5 percent to 3.1 million in April. People typically quit when they either find a new job, usually at higher pay, or are confident they can soon find one.
For that number to fall at the same time employers are posting a record number of job openings suggests that not many people are being lured away from their current jobs by other companies dangling attractive pay. In other cases, companies in specific industries may be offering bigger paychecks, but those raises are being offset by other trends. With the workforce aging, higher-paid employees are retiring and being replaced by younger, lower-paid workers, which could depress overall wage growth.
Another possible clue, US News and World Report‘s economy reporter Andrew Soergel points out, is that “gains were most prominent … among lower-paying sectors like leisure/hospitality and accommodation/food services,” while employers appear to be having a harder time filling higher-paying jobs:
Only 59,000 information hires were made in April – the sector’s softest performance since early 2013. Trade, transportation and utilities hires fell to their lowest level since 2014 at 972,000, and retail trade hires in April were at their lowest of the year, at 675,000. The stalwart financial activities sector also saw hiring fall to its second-lowest point since February 2015 at 174,000.
“The stagnation in hiring and rising number of job openings suggest structural challenges beneath the ever-cyclically improving labor market,” a team of researchers at Wells Fargo Securities wrote in a research note Tuesday. Indeed, analysts for years have posited that a skills gap has been holding back employers from finding quality workers. Those out of work and looking for a job are perceived to be less likely to possess the technical know-how needed to lock down a job. And based on Tuesday’s numbers, employers’ viable pool of applicants appears somewhat shallow.