Labor Market Challenges : In a significant development, the Bureau of Labor Statistics (BLS) announced on Tuesday that job openings in the US have reached a two-year low, indicating a potential stabilization in the employment market.
As expected, the number of available jobs dropped to 9.582 million in June, translating to 1.6 job seekers per available position.
This figure is notably below the corrected data for May, which stood at 9.61 million job openings, and marks a substantial decline from March 2022, when the BLS recorded an impressive count of nearly 12 million open opportunities.
Following the Federal Open Market Committee meeting on July 26, 2023, Fed Chair Jerome Powell addressed three key aspects of the rate decision at the William McChesney Martin Jr. Federal Reserve Board Building.
Federal Reserve officials have undertaken 11 benchmark interest rate hikes since March, taking it to its highest level in 22 years. Their objective is to strike a delicate balance: curbing demand by making housing, cars, and investments more expensive, while taming inflation without causing a slump or damaging the job market – a challenge that has been coined the elusive “soft landing”.
Gus Faucher, CNN’s PNC Financial Services analyst, opined, “It looks like a soft landing, but we won’t know for sure until four or five months from now if this is a soft landing or if things keep getting worse and we go into recession.”
The June Job Openings and Labor Turnover Survey (JOLTS) statistics reveal a decline in new hires from 6.23 million to 5.91 million, exits from 4.067 million to 3.722 million, and cuts from 1.546 million to 1.527 million.
While healthcare, state, and municipal government vacancies experienced growth, education vacancies dwindled, and positions in transportation, storage, energy, and federal government sectors also declined. A Navy Pier job fair in Chicago on April 11, 2023, predominantly attracted tourist workers.
June hiring witnessed a drop of 209,000 new jobs, representing the lowest hiring rate since the outbreak began. Comparing to February 2020, where 6.9 million jobs were available, only 3.49 million remained, with 1,968 jobs being dismissed.
Oxford Economics researchers Matthew Martin and Ryan Sweet noted that “job openings fell to their lowest level since April 2021.” They also pointed out the persistence of a significant difference between current and long-term average job levels, indicative of slack in the labor market. Moreover, despite the decrease in the quits rate, wages remain impacted as workers seek higher-paying opportunities.
Wells Fargo economists Sarah House and Michael Pugliese asserted that the latest JOLTS data indicates the Fed’s ability to reduce inflation without adversely affecting employment.
The departure rate, at 2.4%, is somewhat higher than pre-outbreak levels, signaling a decline in demand and contributing to a rise in unemployment.
Highlighting the challenges ahead, House and Pugliese stated that the diminishing job prospects imply a continued softening of demand, making it harder to prevent the unemployment rate from rising until job numbers recover. They emphasized that while the Fed has made progress in reducing inflation, it has yet to achieve its goal rate of 2%, making it premature to discuss a complete “soft landing”.
The Commerce Department’s announcement of 4.1% core PCE inflation in June last week aligned with June’s Fed-preferred inflation measure dropping lower.
Further indicators of weakening demand emerged on Tuesday, with industrial activity declining for the ninth consecutive month in June, while building spending remained steady.
Chris Rupkey, Chief Economist at FwdBonds, expressed in a blog post that the latest data suggests below-trend growth, slow enough to bring down the inflation rate without plunging the nation into a full-blown recession with soaring unemployment numbers.
Looking ahead, Friday morning will unveil the essential July BLS employment statistics, adding further critical information to the ongoing employment landscape.