Job openings jumped unexpectedly to 11 million in December (2023)

Despite the looming threat of recession and the cacophony of mass layoff announcements, US businesses still need workers — 11.01 million of them.

The number of available jobs unexpectedly rose in December, climbing from a revised 10.44 million openings in November and exceeding economists’ expectations of 10.25 million, according to Bureau of Labor Statistics data released Wednesday. The 11 million openings for December is the highest since July.

The largest increases in job openings were in accommodation and food services, which were up 409,000; retail trade, up 134,000; and construction, up 82,000, according to the BLS report.

The latest Job Openings and Labor Turnover Survey, or JOLTS, showed the labor market that entered 2022 red-hot had finished up the year still balmy: There were 1.9 available jobs for every person looking for one.

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The Federal Reserve is widely expected to announce that it is raising interest rates by only a quarter of a percentage point later Wednesday: Traders were pricing in a 98.4% probability of a so-called 25 basis point interest rate hike earlier this morning, according to fed funds futures tracked by the Chicago Mercantile Exchange.

So what about that remaining 1.6%, you ask?

Amazingly enough, the market was briefly pricing in a small likelihood that the Fed will do NOTHING today and leave rates unchanged at a range of 4.25% to 4.5%. Cue Jim Carrey's "Dumb and Dumber" Lloyd Christmas character: "So you're telling me there's a chance?"

The hopes of a rate-hike pause were seemingly dashed as the morning wore on, though. After the market opened, the pendulum swung away from no rate change and back to a half-point hike, with traders factoring in a slightly more than 2% likelihood of a 50-basis-point increase.

That makes sense. Inflation pressures have cooled somewhat in the past few weeks but prices are still rising at a higher than historical rate. That's why some inflation hawks still think the Fed should be aggressive.

“Even when you start feeling better after the first few days of an antibiotic, you’re always supposed to take the full dose,” saidUniversity of Central Florida economist Sean Snaith in an email.

“If the Fed doesn’t quash this inflation during this current course of treatment, and it flares back up, it’s going to be harder and more painful to put out,” he added.

US stocks fell Wednesday morning. Traders are eagerly awaiting the interest rate announcement from the Federal Reserve at 2 p.m. ET. The Fed is widely expected to raise is key short-term rate again, but by just a quarter of a percentage point to a range of 4.5% to 4.75%. Investors will also be paying close attention to Fed Chair Jerome Powell's press conference at 2:30 p.m. for any clues about future rate hikes. The Fed may look to keep raising rates as long as the labor market is chugging along.

But payroll processor ADP said Wednesday that just 106,000 private sector jobs were added in January. That was far below economists' forecasts and could make investors wonder just how strong job gains will be when the US government issues the official January employment report Friday morning.

In corporate news, shares of Snapchat's parent company Snap (SNAP) plunged in early trading after the company on Tuesday reported sluggish growth and a weak revenue outlook. Chip giant AMD (AMD) rallied though after reporting sales and earnings that topped forecasts. The news may allay some fears about a semiconductor slowdown following poor results from AMD rival Intel (INTC).

The Dow was down about 200 points, or 0.5%, in early trading.

The S&P 500 fell 0.3%.

The Nasdaq Composite slid 0.1%.

Wells Fargo’s Managing Director and Chief Economist expects the Fed to downshift on rate hikes as it enters a new stage in its fight to cool red-hot inflation.

"The Fed is ratcheting it back. There's no need to go 75 basis points or even 50 anymore. You're kind of at the fine-tuning stages of the tightening cycle. Yes, we expect them to go 25 basis points," Jay Bryson told CNN's Chief Business Correspondent Christine Romans on Wednesday.

Bryson anticipates that rate cuts will continue through late 2023 and expects a mild recession which will set the stage for a robust economy in 2024.

"The Fed wants to make sure that inflation is dead. It's certainly coming down, but they want to make sure that it doesn't get stuck at three or four percent," Bryson told Romans. "A recession is going to be relatively mild. Then that brings around economic expansion as you head into 2024."

Bryson, citing the resilience of the current economy, expects a 30% to 40% chance of a soft landing.

"It could happen because inflation is coming down, and so you know, what's going to happen is wages and salaries are going up, and inflation is starting to come down," says Bryson. "But again, our base case is a mild recession this year."

Stocks: US stock futures Wednesday fell ahead of more corporate earnings, a report on job openings and a Federal Reserve rate decision. Dow futures were down 140 points, or 0.4%. S&P 500 futures fell 0.4%. Nasdaq Composite futures were 0.4% lower.

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Oil & gas: US oil prices held steady at $79 barrel. Average US gas prices fell to$3.50 a gallon.

Policymakers face difficult questions about exactly when to pause interest rate hikes. Wait too long, and a painful recession could result. Move too soon, and high inflation could come roaring back.

Timing the pivot is made even more complicated by low visibility into the consequences of the steep rate hikes announced over the past year. The Fed has raised rates from near-zero to a range of 4.25% to 4.5%. The European Central Bank’s main rate is 2%, while the Bank of England’s is 3.5%. All are the highest since the 2007-2008 financial crisis.

It takes time for the full effects of these moves to feed through the economy, even as housing markets come under strain and consumer and businesssentiment takes a hit.

“We’ve not seen all of those lagged effects materialize,” said Vivek Paul, UK chief investment strategist at the BlackRock Investment Institute.

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Investors are becoming increasingly confident that major central banks will change course soon. They expect rates set by the Fed, the Bank of England and the ECB to reach their peak by this spring. At that point, they’re expected to hold rates steady while they assess the impact on inflation.

One challenge, though, is that the full impact is unlikely to become apparent until next year.

Take the housing market, which is very sensitive to changes in interest rates and is closely monitored by central bankers. In the United Kingdom, more than 1.4 million households need to renew fixed-rate mortgages this year. Most had been set at interest rates below 2%.

When their mortgage costs rise, they could pull back spending. That could ease inflation, but also boost the risk of recession. (The United Kingdom is the only Group of Seven economy that the IMF predicts will shrink this year.)

Another major unknown is the job market. The Fed wants to cool hiring and wage increases, which can drive up inflationary pressures. It has acknowledged that “there’s going to be a bit of pain to achieve the inflation target,” seeing job losses as the “lesser of two evils,” Rossiter said.

Recent inflation data has looked promising. In the United States,annual inflation has dropped every month since June, reaching 6.5% in December. In Europe and the United Kingdom, where energy costs are more affected by Russia’s war, annual inflation has slipped to 9.2% and 10.5%, respectively.

But there’s still plenty of reason for caution. According to the IMF, core inflation, which strips out volatile food and energy prices, does not appear to have peaked in many countries, adding to risks that price increases could become embedded across the economy. And inflation in Francerose in Januaryafter the government rolled back some energy subsidies, showing how tenuous gains in Europe have been.

That’s pushing central bankers to maintain their tough tactics, especially in London and Frankfurt.

The Fed is forecast to announce another quarter-point interest rate hike on Wednesday. The Bank of England and ECB are both expected to hike by another half a percentage point on Thursday.

New year, new attitude on Wall Street.Stocksare off to a strong start in 2023 following last year’s abysmal showing.

TheDowhas gained more than 2% in January. TheS&P 500is up nearly 6% and the tech-heavyNasdaq Compositehas soared 10%. That’s the Nasdaq’s best month since July.

Stocks have rallied this monthdue to hopes that inflation pressures are starting to abate. That should allow the Fed to issue smaller rate increases – and possibly even pause them later this year. Decent, if not spectacular, earnings from Corporate America also are contributing to the market’s good mood.

Stocks have rallied this monthdue to hopes that inflation pressures are starting to abate. That should allow the Fed to issue smaller rate increases – and possibly even pause them later this year. Decent, if not spectacular, earnings from Corporate America also are contributing to the market’s good mood.

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