US labor market softening as job openings hit 10-month low, hiring remains tepid,

WASHINGTON: U.S. job openings fell to a 10-month low in July and there were more unemployed people than positions available for the first time since the COVID-19 pandemic, data consistent with easing labor market conditions and supporting expectations the Federal Reserve would cut interest rates this month.

Despite cooling demand for workers, layoffs remained relatively low, the Labor Department report showed on Wednesday.

Fewer workers are also engaging in job-hopping. There were 0.99 job openings for every unemployed person, down from 1.05 in June and the first drop below the 1.0 mark since April 2021, when the economy was digging out of the pandemic-induced slump.

The labor market has slowed, with economists blaming President Donald Trump’s sweeping import tariffs. Labor supply has also declined amid the Trump administration’s immigration crackdown.

Labor market softness was reinforced by the Fed’s “Beige Book” report, which noted an “increase in the number of people looking for jobs” in most districts in late August.

“The deterioration highlights the gradual erosion in what has remained a generally healthy labor market through the Fed’s efforts to corral inflation these past few years,” said Sarah House, a senior economist at Wells Fargo.

“Although economic policy uncertainty has retreated somewhat since the spring, we suspect that the slower pace of consumer spending and cost pressures related to tariffs will keep the pressure on businesses to look for cost savings where they can, including their workforce.”

Job openings, a measure of labor demand, had dropped 176,000 to 7.181 million by the last day of July, the Labor Department’s Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey, or JOLTS report.

That was the lowest level since September 2024. Job openings have decreased by more than 300,000 over the past two months. Economists polled by Reuters had forecast 7.378 million unfilled jobs.

There were 181,000 fewer job openings in the healthcare and social assistance sector, marking the second straight monthly decline in vacancies.

This sector has been the main driver of employment gains in recent months. Unfilled positions declined 110,000 in the retail sector while arts, entertainment and recreation vacancies fell by 62,000.

Professional and business services job openings decreased by 56,000. But job openings increased in the construction, manufacturing and financial activities categories. Federal government vacancies rose by 18,000, likely related to recruitment for immigration enforcement.

The job openings rate slipped to 4.3% from 4.4% in June.

Hiring remained lackluster, increasing by 41,000 to 5.308 million, with the gains scattered across wholesale trade, manufacturing and other services sectors. It fell in the leisure and hospitality, transportation, warehousing and utilities, and healthcare and social assistance sectors.

The hires rate was unchanged at 3.3%. The Fed’s Beige noted that “firms were hesitant to hire workers because of weaker demand or uncertainty.”

Layoffs rose 12,000 to 1.808 million, led by the construction sector. But layoffs decreased by 130,000 in the professional and business services industry. The layoffs rate held steady at 1.1%. The relatively low level of layoffs is anchoring the labor market.

A Reuters survey of economists expects the government’s closely watched employment report on Friday will likely show nonfarm payrolls increased by 75,000 jobs in August after rising by 73,000 in July.

Employment gains averaged 35,000 jobs per month over the last three months compared to 123,000 during the same period in 2024, the government reported in August.

The unemployment rate is forecast to climb to 4.3% from 4.2% in July. Fed Chair Jerome Powell last month signaled a possible rate cut at the U.S. central bank’s September 16-17 policy meeting, acknowledging the rising labor market risks, but also added that inflation remained a threat.

The Fed has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December.

Financial markets are expecting a rate cut at this month’s meeting. The employment report for August, scheduled to be released on Friday, and consumer price data due next week will shed more clues on the future monetary policy path.

Some economists argued the labor market remained in decent shape, noting that the decline in job openings was concentrated in the healthcare and social assistance industry.

“While this report will no doubt be highlighted by those seeking to cut rates this month, it is not a sign of a weak or even a weakening labor market,” said Conrad DeQuadros, senior economic advisor at Brean Capital.

Fewer people voluntarily quit their jobs, keeping the quits rate at 2.0% for a fourth straight month. The loss of confidence in the labor market is resulting in moderate wage growth.

Read More: Kraft Heinz Split- All You Need to Know

A line chart titled “US job quitters” that tracks the metric over the past 25 years. The number of workers who quit their job fell to 3.2 million in July.

A line chart titled “US job quitters” that tracks the metric over the past 25 years. The number of workers who quit their job fell to 3.2 million in July.

“Job seekers have definitively lost the negotiating leverage they enjoyed in the immediate post-pandemic period,” said Allison Shrivastava, an economist at Indeed. “And with inflation still looming large, many workers’ paychecks might not be able to keep pace with rising costs.”