US Job Openings Fall Below 10 Million for First Time Since 2021

(Bloomberg) -- Vacancies at US employers dropped in February to the lowest since May 2021, suggesting a cooling in labor demand in some industries but still indicative of a job market that's too tight for the Federal Reserve.

The number of available positions decreased to 9.9 million from a downwardly revised 10.6 million a month earlier, the Labor Department's Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. Vacancies were below all estimates in a Bloomberg survey of economists.

The figures, which can be volatile on a monthly basis, suggest labor supply and demand are moving into better balance. Still, further progress is needed — particularly in the service sector — to help alleviate wage pressures. Enduring strength in the job market remains a key hurdle for the Fed as it seeks to bring inflation down to its 2% goal.

The yield on the two-year Treasury note plunged after the report and the dollar fell.

The JOLTS report showed that the so-called quits rate, which measures voluntary job leavers as a share of total employment, edged up to 2.6%. That equates to about 4 million Americans. Quits increased in business services, accommodation and food services, and wholesale trade.

The ratio of openings to unemployed people slid to 1.67 in February, the lowest since November 2021, from almost 1.9 in the prior month. In the firm labor market that preceded the pandemic, that ratio was about 1.2.

What Bloomberg Economics Says...

“February's JOLTS report shows the labor market is unambiguously cooling, with labor demand moving more in line with supply. Most of the loosening has come via a decline in job openings, which should help alleviate Fed concerns of a potential wage-price spiral.”

— Stuart Paul, economist

To read the full note, click here

Fed officials watch that ratio closely and have pointed to the elevated number of job openings as a reason why the central bank may be able to cool the labor market — and therefore inflation — without an ensuing surge in unemployment.

The largest declines in vacancies were in business services, healthcare and social assistance, and transportation, warehousing and utilities. Openings rose in construction and recreation and entertainment. While hiring eased, layoffs also declined.

Firms with fewer than 10 employees experienced the biggest decline in job openings on a percentage basis. Vacancies fell in all four US regions.

Looking ahead, the recent turmoil in the banking sector is expected to prompt lenders to further tighten credit conditions, something that's expected to curb consumer spending as well as stifle business investment. Given companies tend to freeze hiring before initiating layoffs, the JOLTS report will be a key indicator of labor market strength in coming months.

The data precede Friday's monthly jobs report, which is currently forecast to show employers added nearly a quarter of a million workers in March. Economists are expecting the unemployment rate to hold at a historically low 3.6% and for average hourly earnings to rise firmly.

Some economists have questioned the reliability of the JOLTS statistics given the survey's low response rate. By year-end, the response rate for JOLTS had fallen to about 31%, roughly half the rate just three years earlier.

--With assistance from Jordan Yadoo and Augusta Saraiva.

(Adds Bloomberg Economics comment)

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