U.S. labor market starts to cool; job openings post biggest drop in nearly 2-1/2 years

WASHINGTON, Oct 4 (Reuters) – U.S. job vacancies fell at their most in nearly 2-1/2 years in August, suggesting the job market was beginning to cool as the economy grapples with higher interest rates falling aim to dampen demand and tame inflation.

Despite the fifth month of falling job vacancies this year, reported by the Labor Department in its Job Vacancy and Labor Turnover Survey, or JOLTS report on Tuesday, job vacancies remained above 10 million for the 14th straight month.

In August there were 1.7 job openings for every unemployed person, up from two in July while layoffs remained low, indicating a still tight labor market. This is likely to keep the Federal Reserve on its aggressive monetary tightening stance.

“Even as higher interest rates and inflation, and weaker business and consumer confidence begin to dampen labor market activity, the labor market remains healthy,” said Sophia Koropeckyj, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We assume the Fed is not ready to pause just yet.”

Job vacancies fell 1.1 million to 10.1 million on the last day of August, the lowest since mid-2021. The August drop was the largest since April 2020, when the economy stalled from the first wave of the COVID-19 pandemic faltered. Economists polled by Reuters had forecast 10.775 million job vacancies.

The drop in job vacancies was led by health and social welfare with a drop of 236,000. There were 183,000 fewer jobs in other services and 143,000 fewer jobs in retail.

The job vacancy rate fell to 6.2% from 6.8% in July. New hires increased moderately, keeping the hiring rate at 4.1%.

The Fed is trying to cool labor demand and the broader economy to bring inflation down to its 2% target. The US Federal Reserve has raised interest rates since March from near zero to the current range of 3.00% to 3.25%, and last month signaled more big hikes were on the way this year.

“The Fed will welcome this apparent decline in excessive labor demand in the hope that it will ease wage pressures,” said Conrad DeQuadros, chief economic adviser at Brean Capital in New York. “However, the August vacancies-to-unemployment ratio was about the same as in the fourth quarter of 2021, which was then a record high.”

The number of people voluntarily quitting their jobs rose to 4.2 million from 4.1 million in July. Layoffs rose in the accommodation and hospitality sector, where 119,000 more people quit, but fell by 94,000 in the professional sector

and business services sector.

The exit rate, used by politicians and economists as a measure of job confidence, was unchanged at 2.8%.

The number of layoffs rose to 1.5 million from 1.4 million in July. The layoff rate rose to 1.0% from 0.9% in the previous month.

“The heat in the job market is heating up as demand for hiring slows,” said Nick Bunker, director of economic research at Indeed Hiring Lab. “This is still a job market for job seekers, just one with fewer benefits for workers than it was a few months ago.”

Reporting by Lucia Mutikani; Edited by Chizu Nomiyama and Andrea Ricci

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