US job openings sink as economy slows, cost to borrow rises

content of the article

WASHINGTON (AP) – The number of available jobs in the U.S. fell in August compared to July as companies become less desperate for labor, a trend that could cool chronically high inflation.

advertising 2

content of the article

This is good news for the Federal Reserve in its efforts to bring down high prices without plunging the economy into recession. The government jobs report released on Tuesday also showed that layoffs remained historically low, even after a modest increase in August. And overall hiring numbers were essentially flat this month.

content of the article

Overall, the data suggests that even when companies are eliminating job postings, they are not shedding workers or putting the brakes on job creation.

“Employers think about who they don’t need to hire, but they don’t think about who they need to lay off,” said Layla O’Kane, senior economist at labor analysis firm Lightcast.

There were 10.1 million vacancies on the last day of August, the government said on Tuesday, down 10% from 11.2 million vacancies in July. In March, job vacancies hit a record nearly 11.9 million.

advertising 3

content of the article

The report buoyed major US markets as a possible sign that the Fed could slow its rapid pace of rate hikes, though most economists said it would take more than one report to bolster the Fed’s course to change. The US releases critical monthly employment data on Friday.

The Dow Jones Industrial Average contributed to its early gains, rising nearly 770 points, or 2.5%, in mid-morning trading.

The job vacancies report followed news that Australia’s central bank made a smaller rate hike than its previous hikes, a rare sign of moderation as central bankers around the world have been rushing to raise rates to counter rising prices.

In a bid to fight the worst inflation in 40 years, the Fed quickly raised its short-term interest rate to a range of 3% to 3.25%, a significant rise from almost zero as recently as March.

Also Read :  Hamilton's economy predicted to keep growing despite challenges

advertising 4

content of the article

Federal Reserve officials hope to reduce labor demand by raising interest rates, driving up the cost of mortgages, auto loans and corporate credit. While workers generally welcome bigger pay rises, the Fed sees the current pace of wage increases — around 6.5% per year according to some measures — as unsustainably high and a key driver of inflation.

Chairman Jerome Powell and other Fed officials are hoping their rate hikes — the fastest in around four decades — will prompt employers to slow their efforts to hire more workers. Fewer job vacancies should ease the pressure on companies to raise wages to attract and retain workers. Lower wage increases, if sustained, could ease inflationary pressures.

advertising 5

content of the article

“This is helping to lower inflationary pressures and reassuring the Fed that there may be a way out without dramatically increasing the unemployment rate,” said Derek Tang, an economist at LHMeyer, an economic research firm.

Powell has warned that the central bank’s rate hikes are likely to lead to higher unemployment and possibly a recession. Still, he and other Fed officials have nurtured hopes of what they call a “soft landing” — in which the economy slows enough to curb inflation, but not so much as to cause a recession.

Christopher Waller, a member of the central bank’s board of governors, has argued that the Fed’s rate hikes may be able to reduce job vacancies and thereby inflationary pressures without causing widespread job losses. But former Treasury Secretary Larry Summers and former IMF Chief Economist Olivier Blanchard have written that past trends make such an outcome unlikely. When job openings fall, layoffs and unemployment typically rise, they found.

Also Read :  Connected Economy Requires New Business Models

advertising 6

content of the article

But for the time being, the companies are still hiring employees. Tuesday’s figures come in the same week as a key jobs and unemployment rate report is due to be released on Friday. Economists forecast that employers added 250,000 jobs in September and that the unemployment rate stayed at 3.7% for the second straight month.

The level of vacancies and the number of layoffs have declined in recent months, indicating some cooling in the labor market. Most people quit for another, typically higher-paying, job. About 4.2 million people quit their jobs in August, still an all-time high but down from a record 4.5 million last November.

Last week, San Francisco Fed Chair Mary Daly said the drop in job vacancies and layoffs are “early signs the job market is easing.” However, she added that the Fed still needs to see concrete evidence that inflation is falling before it begins scaling back its rate hikes.

advertisement

Comments

Postmedia strives to maintain a vibrant but civilized forum for discussion and encourages all readers to share their views on our articles. Comments may take up to an hour to be moderated before they appear on the site. We ask that you keep your comments relevant and respectful. We’ve turned on email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update on a comment thread you follow, or when a user you follow comments follows. For more information and details on how to customize your email settings, see our Community Guidelines.

Leave a Reply

Your email address will not be published.