Jerome Powell Can’t Count on a Labor Market Miracle
The Federal Reserve chair has held out hope that a decline in job openings would cool wage pressure. He needs a backup plan.
Job openings are moving in the wrong direction.
Photographer: Spencer Platt/Getty Images
Federal Reserve Chair Jerome Powell’s dream of a miraculous and pain-free labor market disinflation just faced a surprise setback. Powell wants the number of job openings to decline to cool wage pressure, but a Labor Department report Tuesday showed it’s starting to move in the wrong direction. Powell shouldn’t be betting the house on his scenario, and chances are that he will stop promoting it so enthusiastically.
Consider the latest developments, which helped send two-year Treasury yields to a 14-year high and exacerbated stock market declines.1 Openings rose to 11.2 million in July, up from 11 million in June, the first increase in four months. Under the surface, the sources of the increase — government and lower-paying service jobs — weren’t exactly a sign of economic boom times, but the numbers were also not consistent with a cool-down of the hottest inflation in 40 years. Coupled with the upward revision in June job openings, the trend looks as if it’s flattening instead of plummeting, and there are still about two jobs for every unemployed person.