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U.S. job openings fell by the most in nearly 2-1/2 years in August, suggesting that the labor market was starting to cool as the economy grapples with higher interest rates aimed at dampening demand and taming inflation.
Despite the fifth month of decreases in job openings this year reported by the Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday, vacancies remained above 10 million for the 14th straight month.
While there were 1.7 job openings for every unemployed person in August, down from two in July, this closely watched measure of supply-demand balance in the labor market remained above its historical average. Layoffs also stayed low, signs of a still-tight labor market, which likely keep the Federal Reserve on its aggressive monetary policy tightening path.
"Even as higher interest rates and inflation, and weaker business and consumer confidence are beginning to tamp down labor market activity, the labor market still remains healthy," said Sophia Koropeckyj, a senior economist at Moody's (NYSE:MCO) Analytics in West Chester, Pennsylvania. "We expect that the Fed is not yet ready to pause."
Job openings dropped 1.1 million to 10.1 million on the last day of August, the lowest level since mid-2021. August's decline was the largest since April 2020, when the economy was reeling from the first wave of the COVID-19 pandemic. Economists polled by Reuters had forecast 10.775 million vacancies.
The broad decrease in job openings was led by healthcare and social assistance, with a decline of 236,000. There were 183,000 fewer job openings in other services, while vacancies decreased by 143,000 in the retail trade industry. Fewer job openings were also reported in the financial activities, professional as well as leisure an hospitality industries.
Vacancies in the healthcare and leisure industries declined even though employment in the two sectors remains below its pre-pandemic levels, leading some economists to speculate that other factors besides higher borrowing costs were behind the cool off in demand for workers.
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