Job openings data points to cooling job market
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The labor market is cooling rapidly, increasing the odds of an aggressive interest rate cut from the Federal Reserve in just two weeks. New data out Wednesday morning bolsters the case.
Why it matters: The latest job turnover data highlights the risk that the Fed is already behind the curve if it wants to address the deteriorating job market.
Driving the news: Employers slashed the number of job openings in July and fired more workers, according to the Job Opening and Labor Turnover Survey data from the Labor Department.
By the numbers: The number of job openings fell by 237,000 in July. That brings the number of openings as a share of total employment down to 4.6%, from 4.8% — the lowest rate since December 2020.
- The ratio of open jobs per unemployed worker is down to 1.1, below where it was immediately before the pandemic hit and far lower than its peak above 2 in March 2022.
- The number of layoffs and discharges ticked up by 202,000.
The intrigue: The report also included some more promising news about the state of the job market, with both the rate at which employers hired new workers and the rate at which workers voluntarily quit their job ticking up as well.
Between the lines: Until recently, the drop in job openings has occurred alongside low, steady unemployment — a key mechanism that has allowed the labor market to cool without mass job losses or recession.
- If demand for workers continues to soften, it may have to come at the cost of higher unemployment. Companies looking to cut back their payrolls can only do so by reducing vacant positions so much before they need to actively turn to layoffs.
- As Fed governor Christopher Waller said in July, "a continued decline in the job vacancy rate and the vacancy-to-unemployment ratio may lead to a larger increase in unemployment than we have seen the past two years."
What they're saying: "The labor market is no longer cooling down to its pre-pandemic temperature, it's dropped past it," writes Nick Bunker of Indeed Hiring Lab in a note.
- "Nobody, and certainly not policymakers at the Federal Reserve, should want the labor market to get any cooler at this point."
