U.S. labor market starts to cool; job openings post biggest drop in 2-1/2 years
WASHINGTON – U.S. job openings fell by the most in nearly 2-1/2 years in August, suggesting that the labor market was starting to cool as the economy grapples with higher interest rates aimed at dampening demand and taming inflation.
Despite the fifth month of decreases in job openings this year reported by the Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday, vacancies remained above 10 million for the 14th straight month.
There were 1.7 job openings for every unemployed person in August, down from two in July, while layoffs remained low, signs of a still-tight labor market. This will likely keep the Federal Reserve on its aggressive monetary policy tightening path.
“Even as higher interest rates and inflation, and weaker business and consumer confidence are beginning to tamp down labor market activity, the labor market still remains healthy,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We expect that the Fed is not yet ready to pause.”
Job openings dropped 1.1 million to 10.1 million on the last day of August, the lowest level since mid-2021. August’s decline was the largest since April 2020, when the economy was reeling from the first wave of the COVID-19 pandemic. Economists polled by Reuters had forecast 10.775 million vacancies.
The decrease in job openings was led by healthcare and social assistance, with a decline of 236,000. There were 183,000 fewer job openings in other services, while vacancies decreased by 143,000 in the retail trade industry.
The job openings rate dropped to 6.2% from 6.8% in July. Hiring increased moderately, keeping the hiring rate at 4.1%.
The Fed is trying to cool demand for labor and the overall economy to bring inflation down to its 2% target. The U.S. central bank has since March hiked its policy rate from near zero to the current range of 3.00% to 3.25%, and last month signaled more large increases were on the way this year.
“The Fed will welcome this apparent decline in excess demand for labor in the hope that it eases wage pressures,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “However, the ratio of job openings to unemployment in August was at about the same level as seen in the fourth quarter of 2021, which at that time was a record high.”
The number of people voluntarily quitting their jobs climbed to 4.2 million from 4.1 million in July. Resignations increased in the accommodation and food services industry, where 119,000 more people quit, but decreased by 94,000 in the professional
and business services sector.
The quits rate, viewed by policymakers and economists as a measure of job market confidence, was unchanged at 2.8%.
Layoffs rose to 1.5 million from 1.4 million in July. The layoffs rate edged up to 1.0% from 0.9% in the prior month.
“The heat of the labor market is slowly coming down to a slow boil as demand for hiring new workers fades,” said Nick Bunker, head of economic research at Indeed Hiring Lab. “This is still very much a job seekers’ labor market, just one with fewer advantages for workers than a few months ago.”