U.S. job openings slipped to 9.9 million in February, the fewest since May 2021 and a sign that the labor market may be starting to cool.
Vacancies fell from 10.6 million in January, the Labor Department said Tuesday, notably in health care and in professional services, which includes managerial and technical jobs. Openings rose for construction workers.
"Although there is still a shortage of workers, the economic slowdown is prompting employers to take some of the available roles off-line," Jennifer Lee, senior economist with BMO Capital Markets, said in a report.
Despite the drop, the number of layoffs ticked lower in February, with Nick Bunker, head of economic research at Indeed Hiring Lab, noting that the percentage of workers getting the axe remains below its average level in 2019, before the pandemic. Notably, more Americans quit their jobs last month — a sign of confidence they can find better pay or working conditions elsewhere.
The American job market has proven resilient in the face of sharply higher interest rates. Over the past year, the Fed has raised its benchmark rate nine times in a drive to corral inflation that last year hit a four-decade high. The surge in consumer prices has eased since mid-2022 but remains well over the central bank's 2% year-over-year target.
Hiring was expected to slow this year after 2021 and 2022 — the two best years for job creation on record. Instead, employers added an astonishing 504,000 jobs in January and a. Economists believe they added another 240,000 last month, according to a survey of forecasters by the data firm FactSet. The February numbers come out Friday.
Until 2021, monthly job openings never surpassed 10 million in the Labor Department's Job monthly Openings and Labor Turnover Survey (JOLTS). But they had broken that threshold for 20 straight months — until February. The decline in job vacancies "suggests businesses are becoming more wary about additional headcount," Oxford Economics said in a research note.
A strong labor market can put upward pressure on wages — and overall prices.
Federal Reserve officials are hoping to achieve a so-called soft landing — slowing the economy just enough to tame inflation without tipping the world's biggest economy into recession. They hope that employers will reduce job openings without necessarily cutting many jobs.
"This is another sign that the job market is cooling and is also a sign that we could see some downward pressure on wage demands and, thus, cooler inflation," Lee said. "Interestingly, more people quit last month despite slower job growth."
Many economists are skeptical and expect a U.S. recession later this year.
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