In April, U.S. job openings declined more than expected, reaching their lowest level in nearly three years. This development indicates a softening labor market, which could aid the Federal Reserve’s efforts to control inflation. The Labor Department’s Bureau of Labor Statistics reported in its Job Openings and Labor Turnover Survey (JOLTS) that job openings fell by 296,000 to 8.059 million at the end of April, the lowest since February 2021. This resulted in 1.24 job openings per unemployed individual, down from 1.3 in March, the lowest ratio since June 2021.
Fed Chair Jerome Powell closely monitors this ratio as an indicator of labor market tightness. The current level, although still higher than pre-pandemic norms, shows significant easing from its post-pandemic peak of nearly two job openings per unemployed person.
Rubeela Farooqi, Chief U.S. Economist at High Frequency Economics, commented, “The decline in job openings suggests a continued balancing between the supply and demand for labor. From a policy standpoint, the Federal Reserve’s challenge will be to maintain interest rates at levels that control inflation without significantly weakening the labor market.”
Economists surveyed by Reuters had predicted 8.355 million job openings for April. The peak was 12 million in March 2022. Data for March was revised down to 8.355 million from the previously reported 8.488 million.
Job openings decreased across most sectors, with only professional services, private education, retail, finance and insurance, and transportation sectors seeing increases. Despite the decline in openings, the labor market remains relatively strong. The number of people quitting their jobs rose by 98,000 to 3.507 million in April, with the quits rate holding steady at 2.2% for the sixth consecutive month, the lowest since September 2020. Layoffs also reached their lowest level since December 2022, at 1.52 million.
Federal Reserve officials are expected to maintain the central bank’s policy rate in the 5.25%-5.50% range at their next meeting. They have indicated that a rate cut will likely wait until there is clear evidence that inflation is moving back toward their 2% target. A significant weakening of the labor market would be required to trigger a rate cut sooner.
The Fed has welcomed signs of labor market cooling as an indication of rebalancing, which eases upward pressure on prices. Attention now turns to the upcoming monthly jobs report for May, expected to show an unemployment rate steady at 3.9%.
Financial markets are anticipating a potential Fed rate cut in September, with increasing confidence of a second cut in December.
In a separate report, orders for U.S.-manufactured goods increased for the third consecutive month in April, driven by demand for transportation equipment. Factory shipments also rose for the third straight month, reaching their highest level since June 2022. The inventories-to-shipments ratio fell, indicating strong demand for manufactured goods. Nondefense capital goods orders fell by 1.6%, while shipments increased by 2.3%, contributing to the calculation of business spending on equipment in the gross domestic product.
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