Job Openings Dropped in July as Labor Market Cooled
Why It Matters: Implications for interest-rate policy.
Labor market data is closely watched by policymakers at the Federal Reserve as they combat stubborn inflation.
“For workers, this looks like fewer opportunities — if you leave your job now, you’re less likely to land a better one than you were last year at this time,” Elizabeth Renter, a data analyst at the personal finance site NerdWallet, said in an email statement. “For the Fed, this likely looks according to plan.”
Fed policymakers lifted interest rates to a range of 5.25 to 5.5 percent in their last meeting in July, the highest since 2001. Only one Fed meeting has passed since March 2022 where the central bank has not raised rates. Some investors hope that signs the labor market is continuing to cool will push the Fed to end its campaign of rate increases sooner.
Jerome H. Powell, the chair of the Federal Reserve, signaled on Friday that the central bank was not ruling out more rate increases.
“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” Mr. Powell said at the Federal Reserve Bank of Kansas City’s annual Jackson Hole conference in Wyoming.
The new data is likely to be welcomed by the Fed, said Layla O’Kane, a senior economist at Lightcast, a labor market analytics firm. It shows that what the Fed has been doing is working, but policymakers are not likely to declare their mission accomplished just yet, she said.
“This is a really good sign for a cooling labor market, but it’s not a cool labor market yet,” Ms. O’Kane said. “There’s some way to go before we think we solved some of the labor market tightness.”
Background: A surprisingly robust labor market.
The U.S. labor market has defied expectations by remaining strong despite the Fed’s mission to slow down the economy by raising interest rates.
Consistently strong labor data initially fueled predictions that the Fed would continue rate increases until the economy fell into a recession. Many have taken a more optimistic view recently as inflation has begun to moderate alongside a strong labor market.
Employers are starting to feel the effects of high interest rates, said Julia Pollak, chief economist at ZipRecruiter. Companies are being more judicious in their hiring even if they need more people, in part because of the high cost of labor, she said.
“With interest rates this high, some investments don’t pencil out,” Ms. Pollak said. “Businesses that would have opened another location or invested in another truck or another warehouse are taking it slow.”
What’s Next: The August jobs report on Friday.
The August employment report will be released by the Labor Department on Friday.
The unemployment rate dropped to 3.5 percent in July, a sign that although the labor market is cooling, workers are generally still able to find opportunities. The unemployment data for August will be one of the last labor market pulses that Fed policymakers will get before their next meeting on Sept. 19-20.