U.S. job openings unexpectedly fell in August to their lowest level in more than a year as the Federal Reserve tries to bring down near-record inflation and cool the labor market.
The Labor Department said Tuesday there were 10.1 million job openings in August — a significant drop from the previous month’s revised reading of 11.17 million.
Still, the number of jobs available exceeded 10 million for 15 consecutive months; before the start of the pandemic in February 2020, the highest record was 7.7 million.
“The broad-based decline in job openings across all sectors in the United States shows some slack in the labor market,” said Jeffrey Roach, chief economist for Charlotte-based LPL Financial. “But overall, still tight.”
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The Federal Reserve is watching these figures closely as it tries to assess the tensions in the labor market; the lower-than-expected number of openings could bring some relief to policymakers as they try to slow the economy and calm painfully high inflation.
Despite the easing in the labor market, Roach said he does not foresee “a change in the likely actions of the Fed at the next meeting. In our view, the labor market has gone from ‘extremely tight’ to just ‘very tight,’ and the Fed will likely respond with another 0.75% increase in the fed funds rate next month.”
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Meanwhile, the number of Americans quitting their jobs has risen to 4.2 million, or about 2.7% of the workforce – below the peak of 4.5 million recorded earlier this year, but well above the pre-pandemic level of around 3.6 million. Hiring was also virtually unchanged at 6.3 million.
Changing jobs has been a boon for many workers over the past year, with employees seeing an average annual growth rate of 6.7% in wages – a marked increase from the 4.9% of workers who do not change jobs, according to the Atlanta Fed.
The Fed responded to the inflation crisis and extremely tight labor market by raising interest rates at the fastest rate in decades. Authorities approved three consecutive rate hikes of 75 basis points in June, July and September, and signaled that another of that magnitude is on the table in November.
President Jerome Powell conceded that higher rates could “lead to higher unemployment”.
“We think we need to have more flexible labor market conditions,” Powell said. “And if we want to set ourselves up to pave the way for another period of very strong labor markets, we have to put inflation behind us. I wish there was a painless way to do that. ‘there is not any.”
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The data comes ahead of the release of September’s jobs report on Friday morning, which is expected to show employers hired 250,000 workers after a gain of 315,000 in July. The unemployment rate should remain at 3.7%.