US Job Openings Rise, Complicating Fed's Expected Rate Cut
October vacancies unexpectedly hold at a five-month high, creating a late-hour challenge for a Federal Reserve poised to ease monetary policy.
A surprisingly resilient U.S. labor market has presented a fresh complication for the Federal Reserve, just as officials gather to consider an interest rate cut that investors have overwhelmingly priced in.
Job openings in the U.S. rose to 7.67 million in October, a five-month high that defied economist forecasts for a decline, according to a report from the Bureau of Labor Statistics released Tuesday morning. The figure was largely unchanged from the previous month's 7.66 million, indicating that employer demand for workers remains robust despite the central bank's prolonged campaign to cool the economy.
The data landed on the first day of the Federal Open Market Committee's two-day policy meeting in Washington. The timing is critical, as the report challenges the prevailing narrative of a softening labor market that has fueled widespread expectations for the Fed to deliver its third quarter-point rate reduction of the year on Wednesday.
Despite the report's hawkish implications, the initial market reaction was muted, reflecting deep-seated investor conviction that the Fed will move forward with policy easing. S&P 500 futures remained little changed in the hour following the 10 a.m. release, while U.S. Treasury yields held steady. The yield on the 10-year Treasury note hovered near 4.15%, close to a one-month high but showing little immediate reaction to the news.
This steadiness suggests markets are weighing the resilient jobs data against other signs of economic cooling and are holding firm on their bets for a rate cut. As of Tuesday, market pricing continued to imply an 87% probability of a 25-basis point rate cut, a stance built on months of gradually softening inflation and employment trends.
Still, the persistent tightness shown in the Job Openings and Labor Turnover Survey, or JOLTS, creates a dilemma for Fed Chair Jerome Powell and the committee. While inflation has receded from its peak, it remains above the Fed's 2% target. A labor market where openings still significantly outnumber the unemployed could support wage growth and, in turn, exert upward pressure on prices, potentially arguing for a more cautious, 'higher-for-longer' monetary policy.
Some economists urge caution in reading too much into a single report, pointing to potential distortions in the data. "The JOLTS survey's response rate has been a subject of debate," noted Paul Donovan, Chief Economist at UBS, in a recent commentary. He highlighted a broader "no hiring, no firing" narrative that could be stabilizing the market, suggesting a less dynamic but also less volatile employment landscape.
As policymakers deliberate, they will weigh this latest sign of labor market strength against upcoming inflation and retail sales data. The October JOLTS report may not ultimately deter the Fed from cutting rates this week, but it sharpens the focus on Powell's subsequent press conference and the committee's updated economic projections. Investors will be scrutinizing the Fed's forward guidance for any hint that this resilient jobs data could lead to fewer rate cuts in 2026 than previously anticipated.