Minneapolis CNN—The US labor market is cooling off after a three-year high: the number of job postings has dropped to its lowest level in more than two years, according to Bureau of Labor Statistics data released on Tuesday.
According to the most recent job turnover data for June, the number of open opportunities fell for the second consecutive month, falling to a seasonally adjusted 9.582 million, or 1.6 jobs per job seeker, approximately in line with forecasts.
This is only below May’s downwardly revised number of 9.61 million, and represents a significant decrease from the 12 million or more available jobs observed in March 2022, according to the BLS’ Job Openings and Labor Turnover Survey report.
It’s just another positive economic indicator for Federal Reserve policymakers, who have raised the central bank’s benchmark interest rate 11 times since last March, putting it to its highest level in 22 years. In doing so, they want to dampen demand — making houses and automobiles more difficult to purchase, and investments more expensive — and relieve some of the pressure on inflation without destroying the labor market and plunging the economy into recession (the elusive “soft landing”).
“It is looking like a soft landing, but the problem is that we won’t know whether this is a soft landing or whether conditions continue to weaken further and we get a recession four or five months from now,” CNN spoke with Gus Faucher, an economist at PNC Financial Services. “Both a recession and a soft landing look like this.”
There is less pressure now
The June JOLTS survey also revealed that the number of new hires fell to 5.91 million from 6.23 million, quits fell to 3.722 million from 4.067 million, and layoffs fell to 1.527 million from 1.546 million.
Job vacancies climbed in areas such as health care and state and local government, with the exception of education, which saw a decrease in listings. Transportation, warehouses, utilities, and the federal government all saw a decrease in job postings.
“Job openings fell to their lowest level since April 2021, but there is still a large gap between the long-term average level, or one consistent with slack in the labor market,” Oxford Economics researchers Matthew Martin and Ryan Sweet said in a note released on Tuesday. “Further, while the quits rate fell, the measure is quite volatile, and is still at a level that indicates continued pressure on wages as many workers leave jobs in search of other (higher-paying) opportunities.”
Hires plummeted to their lowest level since before the pandemic in June, while other labor turnover indices remain much below pre-pandemic levels: vacancies were just shy of 7 million in February 2020, quits were 3.49 million, and layoffs were 1.968.
“The latest JOLTS report bolsters the prospect that the Fed can tame inflation without inducing carnage in the labor market,” In a note published on Tuesday, economists Sarah House and Michael Pugliese of Wells Fargo said.
Job demand is easing
It relieves pay pressure that the quit rate has returned to 2.4%, which is just a little bit higher than it was before the epidemic, they noted. Although unemployment has remained stagnant for the majority of the last year, the decline in job postings suggests that may be about to change.
Fewer job opportunities indicates, “to ongoing softening in demand, which is likely to make it harder to maintain the effectively flat trend in the unemployment rate unless the supply picture weakens,” Pugliese and House composed. “And while the Fed has made progress in lowering inflation, a sustained return to [its target rate of] 2% is yet to be achieved and suggests that declaration of a ‘soft landing’ remains premature, in our view.”
The core Personal Consumption Expenditures index, the Fed’s preferred inflation indicator, registered 4.1% in June, according to data released last week by the Commerce Department.
Separate economic figures released on Tuesday indicated a slowdown in demand: construction spending for June remained stable, while a carefully monitored indicator of industrial activity revealed decrease for the ninth consecutive month.
“The latest data are consistent with an economy that is experiencing below-trend growth that is just slow enough to bring the inflation rate down without engendering an outright recession that adds millions to the nation’s unemployment lines,” FwdBonds’ chief economist, Chris Rupkey, said in a commentary posted on Tuesday.
Later this week, when the BLS releases its monthly jobs report for July, even more important data will be released.