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High Job Vacancies Raise Last Minute Fears Before Fed Meeting

2 mins
Updated by Ali M.
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In Brief

  • The number of job vacancies in the United States rose to 11 million in Dec.
  • The figure is higher than median estimates of 10.3 million.
  • Markets reacted tensely, waiting to see how it will affect the Fed’s decision later in the day.
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Markets are tense over how the Federal Reserve (Fed) will react to unexpectedly robust U.S. job market data for Dec.

On the last business day of Dec., the number of job openings amounted to 11 million, according to the U.S. Bureau of Labor Statistics. Although vacancies increased in retail trade and construction, they notably declined in the information sector, which includes many tech jobs.

The five-month high was the largest increase since July 2021, and exceeded all estimates, which had a median projection of 10.3 million. In such a market, where demand far outstrips supply, a risk of sustaining upward pressure on wages could continue fueling inflation.

Consequently, the consummate appetite for labor demonstrated by the unexpected increase in open positions could affect the Fed later today.

Anticipation Before Fed Meeting

Markets had a relatively typical reaction to unfavorable news, with the S&P 500 falling and Treasury yields rising. This was also the case for crypto markets, Bitcoin and Ethereum of which fell less than 1%. However, one reason for the muted response is that markets are rather anticipating remarks from Fed Chair Jerome Powell.

The Federal Reserve will hold its first meeting of the year later today. Markets widely expect the monetary authority will continue to slow the pace of its interest rate hikes. From four consecutive 0.75-percentage-point raises, down to 0.5% in Dec., a rise of 0.25% is now expected. Although this is still widely anticipated, negative market sentiment reflects the heightened tension.

Economists’ Recession Fears

One metric Fed officials have been concentrating on has been the ratio of openings to unemployed people. Around 1.2 before the pandemic, it rose to 1.9 in Dec. from 1.7 a month earlier. 

The extraordinarily high number of job openings is one reason the Fed believes its aggressive policies can appropriately address inflation without causing high unemployment. Unfortunately, many economists expect Fed tightening to push the economy into recession over the coming year.

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Nicholas Pongratz
Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage.