In a significant development underscoring a cooling labor demand, job openings in the United States experienced a larger-than-anticipated decline in July, sinking to their lowest point in over two years. According to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS), available positions dwindled from 9.17 million in June to 8.83 million.
This contraction marks the sixth dip within the past seven months. Additionally, the quits rate, measuring voluntary job departures against total employment, fell to 2.3 percent, the lowest since the beginning of 2021. This suggests that Americans are exhibiting diminished confidence in their prospects of securing new positions in the present job market.
The decrease in job vacancies, coupled with heightened participation in the labor force, has played a role in achieving greater equilibrium within the labor market and has moderated wage growth. Despite waning demand for workers, unemployment levels remain historically low. This trajectory has fueled optimism that the US economy could avoid a recession, even in the face of the Federal Reserve’s aggressive interest rate hikes. Federal Reserve Chair Jerome Powell recently indicated that if the labor market continues to loosen, inflation might continue its downward trajectory. Concerns within the Fed persist that rapid wage growth could contribute to inflationary pressures in 2024. However, economists anticipate that wage growth will likely decelerate in the coming months due to reduced opportunities for wage increases through job switches.
A Bloomberg survey of economists had predicted 9.5 million job vacancies, highlighting the disparity between forecasts and the actual figures. Following the release of this data, US Treasury yields experienced a decline, while the S&P 500 index saw an extension of gains. The ratio of job openings to unemployed individuals retreated to 1.5, marking its lowest point since September 2021, down from its peak of 2 to 1 in 2022.
Hiring activity also witnessed a drop, reaching its lowest level since January 2021. Over the past two months, the number of hires has fallen by 458,000, constituting the most substantial decrease since the close of 2020. These trends precede the forthcoming monthly jobs report due on Friday, which is anticipated to reveal the addition of 170,000 jobs by employers in August. When combined with the preliminary benchmark revision released the previous week, this figure emphasizes the measured deceleration in hiring that has transpired over the past year.
Despite these shifts, layoffs remained relatively stable. Owing to persistent shortages in the labor force and the resilience of American consumer spending, companies are displaying reluctance to lay off employees. This reluctance underscores the intricate dynamics currently at play within the job market.