Welcome news: A hiring sign is seen in a cafe in Manhattan. There were 1.7 job openings for every unemployed person in February in the United States, down from 1.9 in January. — Reuters
WASHINGTON: US job openings dropped to their lowest level in nearly two years in February, suggesting that labour market conditions were finally easing, which is welcome news for the US Federal Reserve (Fed) as it considers whether to pause its interest rate hike cycle.
Despite the larger-than-expected decline in job vacancies reported by the Labour Department on Tuesday, the labour market remains tight, with 1.7 job openings for every unemployed person in February, down from 1.9 in January.
Fed officials have been closely monitoring this ratio. Tomorrow’s employment report for March will shed more light on the labour market’s health.
The broad drop in job openings occurred before the recent financial market turmoil, which led to tighter credit conditions and sparked fears of widespread job losses in the economy.
“Arguably this report provides the first evidence of an easing in labour market conditions, which nonetheless remain very tight,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Job openings, a measure of labour demand, were down 632,000 to 9.9 million on the last day of February, the lowest level since May 2021, the monthly Job Openings and Labour Turnover Survey report showed. They fell by 1.3 million in the first two months of this year.
Economists polled by Reuters had forecast 10.4 million job openings. The decline was led by the professional and business services sector, where job openings fell by 278,000.
There were 150,000 fewer vacancies in the healthcare and social assistance industries. Job openings in the transportation, warehousing and utilities sectors fell by 145,000.
But the construction industry sought more workers, with job openings increasing by 129,000. There were an additional 38,000 vacancies in the arts, entertainment and recreation sector.
Regionally, the decline was concentrated in the Midwest, South and West. The Northeast reported a moderate drop.
Small and medium-sized businesses, which have been the drivers of job growth, accounted for most of the decrease, with establishments with 1,000 workers or more reporting a small reduction in job openings.
The job openings rate fell to 6% from 6.4% in January.
Stocks on Wall Street were trading lower. The US dollar fell against a basket of currencies. US treasury prices rose.
The decrease in vacancies suggested that the Fed’s aggressive rate hikes to tame high inflation were starting to yield results.
But against the backdrop of banks tightening lending standards, some economists are worried about a sharp weakening in the labour market. There has been a raft of layoffs, mostly in the technology and housing sectors.
The Fed last month raised its benchmark overnight interest rate by a quarter of a percentage point but indicated it was on the verge of pausing further rate hikes due to financial market turmoil.
The US central bank has hiked its policy rate by 475 basis points since last March, from the near-zero level to the current 4.75% to 5% range.
“The labour market was starting to lose steam even before the banking crisis hit the economy in March, and this sets up a dangerous situation where tighter credit conditions could prompt actual layoffs in the months ahead as corporations struggle to get costs under control,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
Hiring fell to 6.2 million from 6.3 million in January. That lowered the hiring rate to 4% from 4.1% in the prior month.
Even as job openings declined, the number of people voluntarily quitting their positions increased by 146,000 to four million. The resignations were mostly in small businesses.
About 115,000 people resigned in the professional and business services sector. In the accommodation and food services industry, 93,000 workers quit, while wholesale trade reported 31,000 resignations.
About 18,000 educational services workers quit in February. But there were fewer quits in the finance and insurance industries, where resignations fell by 39,000.
The quit rates, which are viewed as a measure of labour market confidence, rose to 2.6% from 2.5% in January. It is, however, down from the 2.9% to 3% range in late 2021 and early 2022, when job hopping was at its peak.
“The more settled state of workers should contribute to a further drop in job openings in the months ahead, as fewer departures reduce the number of new vacancies,” said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina.
“With retention less of an issue for employers, the weakening trend in the quit rate should help to further reduce wage growth.”
Layoffs and discharges dropped from 215,000 to 1.5 million, concentrated in small and medium-sized businesses. The layoff rate dropped to 1% from 1.1% in January.
“Companies are holding on to workers due to the tight labour market but are starting to think twice about adding more expenses to their books,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. — Reuters
