US job openings fall to lowest level since 2021

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US job openings fell to the lowest level in more than three years in July, keeping the Federal Reserve on track to lower interest rates later this month.

There were 7.7mn job vacancies in July, according to the labour department’s Job Openings and Labor Turnover Survey released on Wednesday. That was down from 7.9mn in June, and the lowest total since January 2021. 

Economists, who consider job openings to be a proxy for labour demand, had been expecting 8.1mn openings, according to a Reuters poll.

Job openings have trended downward from their 2022 peak as the labour market has slowed, dropping 13 per cent over the past year. Lay-offs also rose slightly to 1.8mn, the highest level since March 2023, further indicating that demand for workers is slowing.

Daniel Zhao, lead economist at jobs site Glassdoor, said the report “reaffirms that the pandemic job market is over”.

“Job market measures have largely normalised from their 2021-2022 extremes, if not moved past ‘normal’ and into weaker territory,” he added.

The job openings figures come after last month’s weaker than expected payrolls report and annual revisions to previous reports showed jobs growth had slowed.

Investors are eagerly awaiting August’s non-farm payrolls data, which will be released on Friday. Forecasts suggest that job gains will rebound from 114,000 to 160,000.

US government bond yields dropped sharply in response to Wednesday’s labour market data. The two-year Treasury yield, which is highly sensitive to changes in monetary policy expectations, dropped 0.1 percentage points to 3.79 per cent following the release of Wednesday’s data. The yield on the benchmark 10-year note fell 0.06 percentage points to 3.79 per cent.

The drop in jobs openings also raises expectations that the Fed will cut interest rates from their current 23-year high of 5.3 per cent at the US central bank’s next meeting later this month.

Futures pricing indicated that traders were betting on at least a quarter-point interest rate cut when Fed policymakers meet later this month, with a total of more than one percentage point worth of cuts priced in for the rest of the year.

Officials have said they do not need to see additional weakness across the labour market to feel confident that inflation, which surged to the highest level in roughly four decades in the aftermath of the pandemic, is coming under control.

With fears about price pressures easing, Fed officials have turned their focus to maintaining a healthy jobs market. The fear is that the slowdown will morph into a recession that puts millions of Americans’ jobs on the line.

So far, officials maintain that there is a path to bringing inflation back down to the 2 per cent target without hurting the job market, but economists warn that will hinge on the Fed getting its timing right about when and how quickly to lower interest rates.