U.S. Job Openings at 3.5-Year Low

By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job openings fell to a 3-1/2-year low in July, hinting at a cooling labor market; however, this decrease is likely insufficient to trigger a half-percentage-point interest rate cut by the Federal Reserve this month.

According to the Job Openings and Labor Turnover Survey (JOLTS) from the Labor Department, open positions decreased by 237,000 to 7.673 million, marking the lowest level since January 2021. The ratio of vacancies to unemployed individuals was 1.07, down from 1.16 in June and the least since May 2021. The peak was just above 2.0 in 2022.

Despite the decline, a separate Fed report indicated employment levels were “generally flat to up slightly.” Investor and policymaker attention remains high due to four consecutive months of rising unemployment, raising recession concerns. Economists maintain a forecast for a 25-basis-point rate cut during the Fed’s meeting scheduled for September 17-18. The upcoming employment report for August will be critical.

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

Job openings declined predominantly in small businesses, with the healthcare and social assistance sectors losing 187,000 positions, and state and local government, excluding education, down by 101,000. Certain sectors, like professional and business services, saw an increase of 178,000 open positions.

The overall job openings rate fell to 4.6%, the lowest since December 2020, from 4.8% in June. Hires rose by 273,000 to 5.521 million, notably increasing in accommodation and food services, but decreased by 8,000 in federal government jobs. The hires rate increased to 3.5%. Layoffs also saw a rise, reaching 1.762 million, but remained historically low, with a 202,000 increase in July.

Financial markets reflected skepticism about a half-percentage-point rate cut this month, with consumer spending in July being robust. Wall Street stocks traded lower, and the dollar slid against other currencies.

In terms of trade, the labor market appears stable yet noticeably cooler compared to the previous year and a half, noted Bill Adams, chief economist at Comerica Bank. Imports surged, contributing to a widening trade deficit, which increased 7.9% to $78.8 billion, the largest since June 2022. This likely indicates strong domestic demand even as it poses a challenge for GDP growth. The trade deficit with China specifically rose by $4.9 billion to $27.2 billion.

Exports also rose by 0.5% to $266.6 billion. The trend suggests that while trade may hamper GDP growth, it reflects robust economic performance amid growing fears of a recession. Goldman Sachs adjusted its GDP growth estimate for Q3 to a 2.5% annualized growth rate, indicating resilience despite challenges.