Consumer Spending Drives Growth Despite Fewer Job Openings


Job openings dropped to 8.059 million by the last business day of April, and the March figure was revised from 8.488 million to 8.355 million. This was significantly below the forecast of 8.4 million and even lower than the most pessimistic projections on Wall Street.

A notable decline in job openings occurred in the information sector, which has seen a spate of layoff announcements. Openings plummeted by nearly a third, from 152,000 to 109,000, indicating a significant retraction in the soft tech field.

Job openings also decreased in manufacturing, from 546,000 to 516,000. However, it’s worth noting that current openings are still exceptionally high by historical standards. For instance, pre-pandemic, there were 393,000 manufacturing vacancies. The chart below illustrates that manufacturers are still actively trying to fill a substantial number of positions.

Additionally, there was a significant increase in manufacturing hires in April, rising from 292,000 in February and 291,000 in March to 389,000. This indicates that the decline in openings likely resulted from many earlier vacancies being filled, rather than reduced demand for manufacturing labor.

The anticipated slowdown in hiring for leisure and hospitality appears to have started in April, with hires dropping to 964,000 from 1.038 million in March. Rising minimum wages are likely reducing labor demand, particularly following the recent fast food minimum wage increase enacted in California. Additionally, employment in leisure and hospitality is now nearing pre-pandemic levels, indicating the sector is no longer in a recovery phase.

Household Sector Still Going Strong

Job openings and hires in the retail trade sector rose, suggesting employers still perceive sufficient consumer strength to justify expanding payrolls.

The resilience of the household sector was also reflected in Tuesday’s factory orders report from the Department of Commerce. Total factory orders increased by one percent in April, with consumer goods orders rising by 1.2 percent and consumer durable goods orders climbing a robust 2.2 percent for the month. Compared to the previous year, orders have increased by 2.6 percent.

It’s important to note these figures do not account for inflation. The consumer price index for durable goods fell by 0.5 percent in April, suggesting real durable goods orders likely rose by around 2.7 percent.

This aligns with Monday’s construction spending figures, which showed a 0.1 percent increase in single-family home construction spending from the prior month and a 20.4 percent increase from the previous year. Given that builders invest in the construction of purchased homes, this indicates actual household sector home purchases, not speculative activity.

This implies that U.S. consumers still possess sufficient spending power to sustain growth—and potentially inflation. Those interpreting the JOLTS report as an indication for a July rate cut are likely mistaken.

John Carney
John Carney
Before I became a journalist, I practiced law at Skadden Arps and Latham & Watkins.

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