US: Job openings offer another sign the labor market has approached a turning point – Wells Fargo

The nearly half-million decline in job openings in April reported on Wednesday, offers further evidence that labor shortages are no longer worsening according to analysts at Wells Fargo. They warn that the 11.4 million job openings at the end of April follows an upwardly revised figure of 11.9 million for March and underscores that the Federal Reserve still has significant work ahead balancing the labor market, inflationary pressures and wages.

Key Quotes: 

“Bringing the opening rate back down to Earth has been floated as one means in which the labor market could cool without payrolls going into reverse. The job opening rate fell to 7.0% as labor shortages appear to no longer be worsening. However, the drop came from an upwardly revised 7.3% in March, underscoring that the Fed continues to play catch up and has significant work ahead in generating a more balanced labor market that relieves the inflationary pressures stemming from wages.”

“Job openings are not alone in signaling the labor market has approached a turning point. Small business hiring plans the past few months have fallen to the lowest levels since February 2021, job postings from Indeed have been on a downward slide since December, and consumers' own views of the labor market have more recently rolled over.”

“We look for Friday's jobs report to show payroll gains downshifting from the 428K monthly pace of March and April to 325K in May as demand for workers has started to ease.”

“We look for the unemployment rate to press even lower, including a tick down to 3.5% in the May jobs report. Voluntary turnover and thereby wage growth is likely to remain historically strong as a result, keeping the heat turned up on inflation.”