No signs of US labor market deterioration

WASHINGTON: US job openings unexpectedly increased in August after two straight monthly decreases, but hiring was soft and consistent with a slowing labor market that keeps the Federal Reserve on track to cut interest rates again in November.

NEW YORK: An employment sign is seen on the window of a Fedex store on August 02, 2024 in New York City. -- AFP.

The Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday also showed layoffs declining. There were 1.13 job openings for every unemployed person in August compared to 1.08 in July.

Resignations were the lowest in four years, a sign that Americans are growing less confident in the jobs market. Though Fed Chair Jerome Powell on Monday pushed against investors’ expectations for another half-percentage-point rate reduction, he described labor market conditions as having clearly cooled over the past year, noting that “workers now view jobs as somewhat less available than they were in 2019.”

“Today’s JOLTS estimates will be regarded as encouraging evidence that labor demand is stabilizing, implying that further increases in the unemployment rate are likely to be limited,” said Jonathan Millar, a senior economist at Barclays. “The widening gap between hiring and separations likely keeps the Fed on course for a 25 basis points cut in November.”

Job openings, a measure of labor demand, rebounded by 329,000 to 8.040 million by the last day of August, the Labor Department’s Bureau of Labor Statistics said. Data for July was revised higher to show 7.711 million unfilled positions instead of the previously reported 7.673 million.

Economists polled by Reuters had forecast 7.660 million job openings. The rise in vacancies was led by the construction industry, with 138,000 job openings. There were 78,000 unfilled positions in state and local government, excluding education. But job openings in the ‘other services’ category fell 93,000.

The job openings rate increased to 4.8 percent from 4.6 percent in July. Businesses with 10 to 49 employees reported 203,000 more job openings. Medium-sized and large companies saw a decline in vacancies. Hires slipped 99,000 to 5.317 million, pulled down by declines in retail trade, transportation, warehousing and utilities as well as manufacturing, healthcare and social assistance. Hires also fell at hotels, restaurants and bars.

The hires rate dropped to 3.3 percent from 3.4 percent in July. Hires dropped 180,000 among companies with 10 to 49 workers, suggesting a shortage of workers could be an issue. Layoffs declined by 105,000 to 1.608 million. There were decreases in layoffs in the retail trade and healthcare and social assistance sectors as well as at hotels, restaurants and bars. Layoffs, however, increased in the professional and business services industry. Small, medium-sized and large employers all reported a decline in layoffs.

Resignations dropped 159,000 to 3.084 million, the lowest level since August 2020. That pushed the quits rates to a four-year low of 1.9 percent from 2.0 percent in July, which should help to curb wage inflation. The slowdown in the labor market is being driven by cooler hiring following 525 basis points worth of rate hikes from the US central bank in 2022 and 2023 to combat inflation. Price pressures have abated considerably allowing the Fed to shift focus to the labor market.

The central bank last month cut its benchmark interest rate by an unusually large 50 basis points to the 4.75 percent-5.00 percent range, the first reduction in borrowing costs since 2020, in a nod to rising concerns over the labor market’s health. The Fed is expected to cut interest rates again in November and December. September’s employment report, due on Friday is likely to show nonfarm payrolls increased by 140,000 jobs last month after rising by 142,000 in August, according to a Reuters survey. That would be well below the average monthly gain of 202,000 jobs over the past 12 months.

The unemployment rate is forecast to be unchanged at 4.2 percent. It has risen from 3.4 percent in April 2023 as a surge in immigration boosted labor supply. — Reuters.