August’s job-opening drop biggest since April ’20

U.S. job openings plummeted in August by the most since early in the covid-19 pandemic, likely a welcome sign for Federal Reserve officials as they seek to cool demand for workers without triggering a spike in unemployment.

The number of available positions decreased to about 10.1 million in August from 11.2 million in July, the Labor Department’s Job Openings and Labor Turnover Survey showed Tuesday. The August level was lower than all estimates in a Bloomberg survey of economists.

The 1.1 million decline in vacancies was the biggest since April 2020. The decline is consistent with moderating labor demand and reflective of shifting consumption patterns, rapidly rising interest rates and a darkening economic outlook.

Stocks jumped while Treasuries advanced after the report as traders grew optimistic that the Fed may not have to be as aggressive with its interest-rate increases given some signs that demand for workers is cooling.

While the number of vacancies remains extremely high, the ratio of openings to unemployed persons retreated in August. There are some 1.7 jobs for every unemployed person, down from about 2 in July and the smallest ratio since November 2021.

Fed policymakers have pointed to the elevated number of job openings as a way to cool the labor market without an ensuing jump in unemployment. The decline in vacancies may help temper wage pressures that central bankers are trying to tame in an effort to extinguish rapid inflation.

“The ratio of job vacancies to unemployed persons fell sharply in August — such a large drop usually implies a recession — bolstering the case for the Fed to hike by 50 basis points rather than 75 at the November FOMC meeting. If this pace of decline continues, the labor market will be in a much cooler state by early next year, giving the Fed space to end its current tightening cycle,” economist Eliza Winger wrote in a note for Bloomberg Economics.

Hires that were little changed during August suggest some of the decline in vacancies reflected employers withdrawing job postings rather than filling them. The largest decreases in job openings were in health care and social assistance, other services and retail trade.

Some 4.2 million Americans quit their jobs in August, a slight increase from a month earlier. The quits rate, a measure of voluntary job-leavers as a share of total employment, held at 2.7%.

Layoffs increased to the highest level since March 2021, although they remain historically low.

The openings and turnover data precede Friday’s monthly jobs report, which is currently forecast to show U.S. employers added 265,000 to payrolls in September. Economists expect the unemployment rate to hold at 3.7%, just above a five-decade low, and for average hourly earnings to post another firm advance.

While the number of vacancies remains extremely high, the ratio of openings to unemployed persons retreated in August.