US labour market defies rate hikes as job openings rise high in July

Job openings increased 199,000 to 11.239 million at end-July. PHOTO: AFP

WASHINGTON (REUTERS) - US job openings increased in July and data for the prior month was revised sharply higher, pointing to persistently strong demand for labour that is giving the Federal Reserve cover to maintain its aggressive interest rate increases.

The Job Openings and Labour Turnover Survey on Tuesday (Aug 30), showed there were two jobs for every unemployed person last month, pointing to extremely tight labour market conditions. It suggested that fears the economy was in recession after two straight quarterly declines in gross domestic product were greatly exaggerated.

"The Fed has front-loaded its monetary restraint this year to an unprecedented degree and the economy isn't giving them any reason to hold back," said Mr Christopher Rupkey, chief economist at FWDBONDS. "The labour market is strong as a bull, two jobs out there for the unemployed to choose from."

Job openings increased 199,000 to 11.239 million at end-July. Data for June was revised higher to show 11.040 million job openings instead of the previously reported 10.698 million. Economists polled by Reuters had forecast 10.450 million vacancies.

The Fed is trying to cool demand for labour and the overall economy to bring inflation down to its 2 per cent target.

Fed chair Jerome Powell warned last week that Americans were headed for a painful period of slow economic growth and possibly rising unemployment as the US central bank aggressively raises interest rates in a bid to bring supply and demand back into balance. The Fed has raised its policy rate by 225 basis points since March.

Layoffs dropped to 1.398 million from 1.400 million in June. There were decreases in leisure and hospitality, professional and business services as well as finance activities. These offset a surge in trade, transportation and utilities industries.

About 4.179 million people quit their jobs, down from 4.253 million in June. The quits rate, viewed by policymakers and economists as a measure of job market confidence, dipped to a 14-month low of 2.7 per cent from 2.8 per cent in June.

US stocks fell on the data. The dollar was steady versus a basket of currencies. US Treasury prices were mixed.

"Markets will misread this report as an indication that the Fed will hike rates more than expected," said Mr Jamie Cox, managing partner at Harris Financial Group. "The Fed is prone to mistakes and there is a very good chance that inflation comes down for reasons other than rate increases."

The Conference Board's overall consumer confidence index rebounded to 103.2 this month from 95.3 in July, ending three straight monthly declines. Consumers' inflation expectations over the next 12 months fell to 7.0 per cent from 7.4 per cent in July.

Despite the high inflation expectations, the share of consumers planning to go on vacation over the next six months surged to an eight-month high.

There were also increases in the shares of consumers planning to buy motor vehicles as well as major household appliances like refrigerators, washing machines, dryers and televisions over the next six months, which could keep consumer spending supported in the third quarter and the economy growing.

US gross domestic product fell at a 0.6 per cent annualised rate last quarter after contracting at a 1.6 per cent pace in the January-March quarter.

"Recession talk hasn't gone away, but it certainly got a little more quiet lately," said Ms Jennifer Lee, a senior economist at BMO Capital Markets.

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