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U.S. job openings unexpectedly dropped in August to the lowest level in over a year as the Federal Reserve tries to bring down near-record high inflation and cool the labor market.
The Labor Department said Tuesday that there were 10.1 million job openings in August – a major decline from the previous month’s revised reading of 11.17 million.
Still, the number of available jobs has topped 10 million for 15 consecutive months; before the pandemic began in February 2020, the highest on record was 7.7 million.
“The broad-based decline in job openings across sectors in the US shows a slight loosening in the labor market,” said Jeffrey Roach, chief economist for the Charlotte-based LPL Financial. “But overall, still tight.”
THE FED’S WAR ON INFLATION COULD COST 1M JOBS
A hiring sign is posted at a Target store on August 05, 2022 in San Rafael, California. ((Photo by Justin Sullivan/Getty Images) / Getty Images)
The Federal Reserve closely watches these figures as it tries to gauge labor market tightness; the lower-than-expected number of openings could provide some relief for policymakers as they try to slow the economy and cool painfully high inflation.
Despite the loosening in the labor market, Roach said he does not anticipate “a change in the Fed’s likely actions at the next meeting. In our view, the labor market moved from ‘extremely tight’ to just ‘very tight,’ and the Fed will likely respond by another 0.75% increase in the Fed funds rate next month.”
SEVERE RECESSION NEEDED TO COOL INFLATION, BANK OF AMERICA ANALYSTS SAY
Meanwhile, the number of Americans quitting their jobs rose to 4.2 million, or about 2.7% of the workforce – below the high of 4.5 million recorded earlier this year, but well above the pre-pandemic level of about 3.6 million. Hiring was also mostly unchanged at 6.3 million.
Switching jobs has been a windfall for many workers over the past year, with employees seeing an average 6.7% annual wage growth rate – a marked increase from the 4.9% of workers who do not switch jobs, according to the Atlanta Fed.
Jerome Powell, chairman of the U.S. Federal Reserve, arrives to speak during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., on Sept 21, 2022. (Photographer: Sarah Silbiger/Bloomberg via Getty Images / Getty Images)
The Fed has responded to the inflation crisis and the extremely tight labor market by raising interest rates at the fastest pace in decades. Officials approved three consecutive 75-basis-point rate hikes in June, July and September, and have signaled that another of that magnitude is on the table in November.
Chairman Jerome Powell has conceded that higher rates could “give rise to increases in unemployment.”
“We think we need to have softer labor market conditions,” Powell said. “And if we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn’t.”
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The data precedes the release of the September jobs report on Friday morning, which is expected to show that employers hired 250,000 workers following a gain of 315,000 in July. The unemployment rate is expected to hold steady at 3.7%.