US job openings hit 3-1/2-year low as labor market eases

WASHINGTON - U.S. job openings dropped to a 3-1/2-year low in July, suggesting the labor market was losing steam, but the reduction on its own is probably not enough to warrant a half-percentage-point interest rate cut by the Federal Reserve this month.

The larger-than-expected decline in unfilled jobs shown in the Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Wednesday meant there were 1.07 open positions for every unemployed person in July. That was the least since May 2021 and down from 1.16 in June. The vacancies-to-unemployed ratio peaked just above 2.0 in 2022.

Still, the labor market is likely not deteriorating. A separate report from the Fed described employment levels as "generally flat to up slightly in recent weeks."

The labor market is being closely watched by investors and policymakers following four straight monthly increases in the unemployment rate, which stoked fears of a recession. Economists are sticking to their forecasts for a 25-basis-point rate cut at the U.S. central bank's Sept. 17-18 meeting. Much depends on the employment report for August, which is due to be published on Friday.

"Does this report suggest the need for a 50-basis-point rate cut in September?" asked Conrad DeQuadros, senior economic advisor at Brean Capital. "We would say no because … the vacancies-to-unemployed ratio is still high by historical standards."

Job openings, a measure of labor demand, had fallen by 237,000 to 7.673 million on the last day of July, the lowest level since January 2021, the Labor Department's Bureau of Labor Statistics said. Data for June was revised lower to show 7.910 million unfilled positions instead of the previously reported 8.184 million.

Economists polled by Reuters had forecast 8.100 million job openings. Vacancies peaked at 12.182 million in March 2022 and are down by 1.1 million over the year. The decline in open jobs was concentrated among small businesses.

Unfilled jobs declined by 187,000 in healthcare and social assistance and decreased by 101,000 in state and local government, excluding education. These two are among a handful of sectors that have driven job growth this year.

The transportation, warehousing and utilities sector had 88,000 fewer open positions. But job openings increased by 178,000 in the professional and business services category and there were 28,000 vacancies in the federal government. The job openings rate fell to 4.6%, the lowest level since December 2020, from 4.8% in June.

Hires increased by 273,000 to 5.521 million. They rose by 156,000 in accommodation and food services, but decreased by 8,000 in the federal government. The hires rate rose to 3.5% from 3.3% in June.

Layoffs rose 202,000 to 1.762 million, the highest level since March 2023. Layoffs, however, remain low by historic standards. The rise in July was led by an increase of 75,000 in accommodation and food services as well as an advance of 21,000 in finance and insurance.

The layoffs rate rose to a still-low 1.1% from 1.0% in June. Low layoffs were underscored on Wednesday in the Fed's "Beige Book" report, which reported that five of the U.S. central bank's districts saw slight or modest increases in overall headcounts in late August.

It, however, noted that "a few districts reported that firms reduced shifts and hours, left advertised positions unfilled, or reduced headcounts through attrition, though accounts of layoffs remained rare."