Vacancies show a hot labor market. But they could overstate how hot.

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For most of the past year, there were about two job openings for every person seeking work in the United States. That’s good news for workers, millions of whom have found higher wages and new opportunities. But the dynamism has also kept the labor market unsustainably warm and fueled the persistent labor shortages that have helped inflation climb to a 40-year high.

So as the Federal Reserve tries to cool the economy and contain price increases, one measure that central bankers are watching closely is how many job openings there are. “Jobs are still close to a 2-to-1 ratio to the unemployed,” Federal Reserve chairman Jerome H. Powell said last month. “That and stopping are really good ways to see how tight the labor market is and how different it is from other cycles. … We think that these things have really added value for some time now in understanding where the labor market stands.”

But some economists worry that, especially in a tight labor market that is feeling the effects of the pandemic, there is a gap between how sharp the data is and how much weight policymakers give it. The data can be noisy: A message for an IT specialist can linger online long after a company decides not to fill it, or a supermarket that needs three or four cashiers can find them all with one message.

Too much reliance on job openings could further blur an already blurry picture of the economy, making it more difficult for officials to make subtle shifts in the labor market as they unfold. And the ultimate consequence, some economists warn, could be policymakers going too far in their struggle to slow the economy without realizing it until it’s too late.

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“I realize a lot of companies are posting jobs when they don’t really expect to take those jobs,” said Loretta Mester, president of the Cleveland Fed, during a phone call with reporters on Oct. 11. have one opening but it’s the same opening and they’re going to hire five people. Some data should be taken with a grain of salt. But those data show that the demand for labor remains strong.”

On one level there is little reason to be afraid that the number of job openings – more than 10 million in all – tells a fundamentally incorrect story about the economy. The labor market is extremely tight in almost all respects: the unemployment rate is low at 3.5 percent. Wages rise as companies compete for workers. More than 4 million people left their jobs in August, according to the Labor Ministry.

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In addition, Fed officials look at a comprehensive dashboard and don’t make decisions based on one indicator alone.

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For now, policymakers are steadfast in their efforts to raise rates, curb inflation and rebalance the labor market. Officials warn of pain in the future, but they say they can still avoid a recession and avoid widespread layoffs. (At its next meeting, early next month, underlying Fed interest rates are widely expected to rise another 0.75 percentage points.)

But job opportunities are the key to that argument. The Fed can’t boost worker supply, so instead, it’s trying to cool down labor demand with higher interest rates. Officials say they could make a “soft landing” as companies pull back on new investment and staffing, which could reduce job openings without people losing their jobs.

The chances of that happening seem to be shrinking by the week as recession risk increases in the United States and abroad. But a specific problem could arise if job openings themselves tell an incomplete story about how the economy is responding to the Fed’s fight against inflation. If companies are less motivated to fill vacancies they have posted, or slow to remove vacancies – or just never do – that could give officials a false assurance that the job market will continue to withstand the most aggressive fare increase campaign in decades.

It wouldn’t be the first time that flawed labor market data has clouded civil servants’ understanding of the economy. Last year, the Fed failed to raise interest rates even as inflation rose, in part because the job market appeared to be weaker than it actually was.

“If you look at all the labor market indicators — unemployment-pollution ratio, shutdowns — and all those indicators point to a tight labor market and a strong recovery,” said Preston Mui, an economist at Employ America, a liberal think tank, who is skeptical. writes about vacancy data. “But vacancies show a particularly strong labor market. So if the Fed is relying too much on this one indicator, it will tell them to tighten more than they would otherwise, and I think that’s extremely risky.

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Even as companies stare at a slowing economy, it’s unclear what would ultimately drive them to nix their openings. At Basic Fun! toys in Boca Raton, Florida, Jay Foreman weighs his growth ambitions against maintaining his current workforce and ensuring the $200 million company is as financially sound as possible.

Foreman still advertises a handful of creative jobs, such as in graphic and design teams, even though he doesn’t feel an urgent need to hire them. Its headquarters has had trouble filling administrative jobs.

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“Half of our offerings are kind of ‘fishing lists,'” Foreman said. “What I mean by ‘fishing lists’ is that we don’t really need to fill the position, but if we come across a resume that looks really special, we would fill the position.”

Capturing that kind of intent is difficult no matter how openings are measured. One of the most quoted measures comes from the federal Bureau of Labor Statistics, which reports a monthly Job Openings and Labor Turnover Survey, or JOLTS. That counts against vacancies at an employer that is actively recruiting to fill a position where work could begin within 30 days. The most recent report showed a stunning decline in job openings, with 1.1 million job openings disappearing in August. That marked a 10 percent drop from the more than 11 million openings reported in July — and that was good news for Fed officials.

Another measurement comes from Indeed, a major job board that collects daily snapshots of the number of jobs on its platform. Indeed also publishes data on posts added to the platform in the last seven days so that “the posts that stick around forever don’t show up,” said Nick Bunker, director of economic research for North America at the Indeed Hiring Laboratory.

There too, vacancies are high, remaining about 55 percent above February 2020, the last month before the pandemic swept the country. But after peaking in posts in 2020 and 2021, the numbers are slowly declining. Gaps in customer service, arts and entertainment, accounting, insurance, sales and IT operations have all been ticked, according to the Indeed Hiring Lab tracker.

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By and large, the data should not be too far away. Julia Pollak, chief economist at ZipRecruiter, said companies ultimately don’t have much incentive to keep posts online if they don’t plan to fill them. Companies that advertise may have monthly subscriptions that allow them to post a certain number of jobs. Others pay per click or per application. It’s possible for an individual employer to paste an opening on its website for free, but “it’s not free to advertise those posts widely and draw attention to those posts,” Pollak said.

A Goldman Sachs report in May argued that the increase in job openings was “real” and disputed claims that many listings are languishing online. But other experts say: there is still room to understand the limits of what job vacancies can definitively tell policymakers about the labor market at any given time.

“You have to take job postings seriously, but not literally, and I think that’s a good way to think about it,” Pollak said. “Ten million openings, or 20 million online postings, does not necessarily mean the number of vacancies available at that time. But it is a very important measure of hiring sentiment, as well as hiring intensity.”

Across the country, companies are still desperately looking for people. And in their quest, they may run into other problems: There just aren’t enough people to fill millions of jobs, no matter how hard they push.

On a typical busy Saturday, Gary Weiner might have 15 or 16 employees on the shop floor at Saxon Shoes locations in Richmond and Fredericksburg, Virginia. He could use four to six more employees, he said, and he’s especially excited to hire someone for the holidays. is in full swing.

Each year of the pandemic presented a new challenge for the shoe company: 2020 was “almost devastating” and 2021 was “almost bearable” thanks to government stimulus. Now the company is approaching pre-pandemic sales. But Weiner just doesn’t have enough staff — and often his postings don’t yield any results.

“We’re on Indeed, on ZipRecruiter,” Weiner said. “People just aren’t there to apply for these kinds of jobs.”

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