U.S. job openings at record high; labor market tightening

U.S. job openings jumped to a record high in June, outpacing hiring, the latest indication that companies are having trouble finding qualified workers.

The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday also underscored labor market strength that will likely encourage the Federal Reserve to continue tightening monetary policy despite benign inflation and concerns about consumer spending.

"Companies are running out of workers to hire to do the job or even train to do the work, and this is a ticking time bomb for economic growth," said Chris Rupkey, chief economist at MUFG in New York. "Today's JOLTS data bring a September meeting balance sheet unwind announcement a little closer to reality."

JOLTS, is one of the job market metrics on Fed Chair Janet Yellen's so-called dashboard. Economists expect the U.S. central bank will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its next policy meeting in September.

Tame inflation and worries about consumer spending amid tepid wage growth and faltering motor vehicle sales, however, suggest the Fed will delay raising interest rates again until December. It has increased borrowing costs twice this year.

Job openings, a measure of labor demand, increased by 461,000 to a seasonally adjusted 6.2 million. That was the highest level since the data series started in December 2000 and pushed the job openings rate up two-tenths of a percentage point to a near one-year high of 4.0 percent.

The monthly increase in job openings was the largest since July 2015. The surge in job openings was almost broad-based.

There were 179,000 additional vacancies in the professional and business services industries. The health care and social assistance sector had 125,000 more job openings and construction companies had an additional 62,000 unfilled positions. In June, job openings were concentrated in the Midwest and West regions.

SKILLS MISMATCH

The ratio of job openings to unemployment hit a 16-year high. Hiring was little changed at 5.4 million in June, leaving the hiring rate steady at 3.7 percent.

The gap between job openings and hiring points to a skills mismatch, which was also corroborated by a separate report on Tuesday from the National Federation of Independent Business.

The NFIB survey showed job openings at a 16-year high in July. Small businesses cited a lack of skills as the main reason for the vacancies. Others also blamed "unreasonable" wage expectations, attitude, appearance as well as drug addiction for disqualification of job seekers.

Economists are optimistic that tightening labor market conditions will spur faster wage growth. Annual wage growth has struggled to break above 2.5 percent, contributing to inflation persistently running below the Fed's 2 percent target.

"The JOLTS report continues what has been a reasonably strong run for the labor market data, and we expect continued improvement in the job market to keep upward pressure on wages," said Daniel Silver, an economist at JPMorgan in New York.

Other details of the JOLTS report were mixed. About 3.1 million Americans voluntarily quit their jobs in June, down from 3.2 million in May. As a result, the quits rate, which the Fed looks at as a measure of job market confidence, dipped to 2.1 percent from 2.2 percent in May.

Layoffs rose 28,000 to 1.7 million in June, lifting the layoffs rate one-tenth of a percentage point to 1.2 percent.

"Layoff rates are historically low. But the recent increase may be worth watching," said Jed Kolko, chief economist for job site Indeed in San Francisco.

Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao