Job openings in the U.S. dropped in December from a four-year high, a sign employers put expansion plans on hold as lawmakers wrangled over tax and spending programs.
The number of positions waiting to be filled fell by 173,000 to 3.62 million, the fewest since September, from a revised 3.79 million the prior month that was the most since May 2008, the Labor Department said today in a statement. The pace of hiring cooled, and firings were the lowest on record.
The threat of tax increases and government spending cuts that constituted the so-called fiscal cliff raised concern the economy would stumble at the end of 2012. Further progress may continue to be delayed early this year as Congress debates how much to reduce federal outlays.
“The labor market is improving, but certainly not at a robust rate,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. Price is the best forecaster of payroll growth in the past two years, according to data compiled by Bloomberg. “We’re still going to see that relatively modest pace of advancement in the first part of 2013 as businesses wait to see how the adjustments with payroll taxes and spending cuts affect the economy.”
Stocks advanced, sending benchmark indexes to five-year highs, as earnings topped estimates and investors awaited President Barack Obama’s State of the Union address. The Standard & Poor’s 500 Index rose 0.2 percent to 1,519.43 at the close in New York.
Obama speaks tonight amid fresh concerns about the economy, which shrank at a 0.1 percent annual rate in the last three months of 2012 after expanding at a 3.1 percent pace in the previous three months, according to Commerce Department figures issued last month. The jobless rate was 7.9 percent in January, little changed from the 7.8 percent when he took office in January 2009.
Parts of the global economy are also struggling. India’s industrial output unexpectedly dropped in December for a second month as demand faltered in an economy expanding at the weakest pace in a decade, other figures showed today.
Today’s U.S. job openings report helps illuminate the dynamics underlying the government’s monthly employment figures. Payrolls increased by a revised 196,000 workers in December and 247,000 the month before, the Labor Department said Feb. 1. Revisions added a total of 127,000 jobs to the count in the last two months of 2012.
Employment then slowed at the start of this year, with payrolls rising by 157,000 last month.
Six of seven major industry categories showed a drop in job openings in December, led by professional and business services, which had a 92,000 decrease in jobs available. Trade and transportation followed as retailers sought less help.
Construction was the only category to show an increase, with job openings rising by 3,000 to 92,000.
The number of workers hired in December dropped to 4.19 million, the fewest in a year, from 4.4 million, pushing the hiring rate down to 3.1 percent from 3.3 percent, according to today’s report.
A possible slowdown in consumer spending and government cutbacks threaten to impede further progress in the labor market. Payroll growth in January was the weakest in four months, and households this year will see their paychecks reduced by higher payroll taxes while Congress debates whether to slow the growth of federal outlays.
At the start of the year, Congress allowed the payroll tax that funds Social Security benefits to revert to 6.2 percent from 4.2 percent and boosted the levy on top income earners, which may weigh on consumer spending.
Lawmakers now have until the end of the month to come up with a way to avert $1.2 trillion in across-the-board spending cuts, known as sequestration, set to take effect on March 1. The Obama administration has begun a public campaign to head off the cuts, which White House officials said will limit education outlays, small business loans, food safety inspections and defense.
Total separations, which include firings and those who leave their jobs voluntarily, decreased to 4.07 million in December from 4.22 million, according to today’s Labor Department report. That drove the separations rate down to 3 percent from 3.2 percent in November.
The number of people fired fell to 1.57 million, the least since monthly records began in December 2000.
Also included in total separations were 2.16 million people who quit their jobs in December, down from 2.18 million in the prior month.
In the 12 months ended in December, the economy created a net 1.8 million jobs, representing 51.8 million hires and about 50 million separations, today’s report showed.
Home Depot Inc., the largest U.S. home-improvement retailer, is among companies stepping up hiring. The largest U.S. home-improvement retailer said it plans to add more than 80,000 temporary workers ahead of its busiest season, about 14 percent more than a year ago, as a housing rebound spurs spending on remodeling and landscaping. Rival Lowe’s Cos. is boosting seasonal hiring by 13 percent.
Considering the 12.2 million Americans who were unemployed in December, the figures indicate there were about 3.4 people vying for every opening, up from about 1.8 when the recession began in December 2007.
Job generation in 2012 was strong enough to bring the U.S. unemployment rate down 0.7 percentage point to a four-year low of 7.8 percent in December. Employment picked up in the last three months of the year, when payrolls expanded by 603,000 workers.
Fed officials are waiting until the outlook improves before they tighten monetary policy. The central bank’s Federal Open Market Committee said in December it would hold its benchmark lending rate near zero as long as inflation isn’t forecast to rise more than 2.5 percent in one to two years and unemployment remains above 6.5 percent.
“With employment so far from its maximum level and with inflation currently running, and expected to continue to run, at or below the Committee’s 2 percent longer-term objective, it is entirely appropriate for progress in attaining maximum employment to take center stage in determining the committee’s policy stance,” Fed Vice Chairman Janet Yellen said yesterday during a speech in Washington.
Yellen also said she believes high unemployment is the result of too little demand rather than a mismatch of workers’ skills with the needs of employers. The economy faces hurdles including low income expectations by households and fiscal restraint, she said.