The US Department of Labor announced on Wednesday (September 4) that job vacancies in the US in July fell more than expected, reaching the lowest level in three and a half years. This is another sign of weakness in the labor market, which may prompt the Federal Reserve to be more aggressive in cutting interest rates this month.
The Job Openings and Labor Turnover Survey (JOLTS) report released by the Bureau of Labor Statistics (BLS) under the US Department of Labor is an economic indicator closely watched by Federal Reserve policymakers. The new report released on Wednesday showed that as of the end of July, there were a total of 7.67 million job vacancies in the US, down from the revised 7.91 million in June. This is the lowest level of job vacancies since January 2021.
Economists surveyed by Dow Jones & Company had previously predicted that job vacancies in July would be 8.1 million.
The report on Wednesday also showed that the number of hires in July was 5.5 million, slightly higher than in June. The hiring rate in July increased from 3.3% in June to 3.5%.
The quit rate is an indicator of worker confidence, and in the report on Wednesday, this indicator rose to 2.1%, higher than the 2% in June.
With the decrease in job vacancies in July, the ratio of job vacancies to available workers in the US has dropped to 1.1:1, meaning there are approximately 1.1 jobs available for every job seeker. This ratio is about half of the peak value at the beginning of 2022 when the ratio was over 2:1.
Neil Dutta, chief economist at Renaissance Macro Research, wrote on social media platform X that the decline in this ratio is “another sign of cooling labor demand, slightly higher than the ratio before the outbreak of the pandemic.”
With the release of the latest JOLTS report, the labor market has become a focus of policymakers’ attention. Wednesday’s data may prompt the Federal Reserve to cut interest rates more aggressively. It is widely expected that the central bank will announce a rate cut at the next policy meeting scheduled for September 17-18. Federal Reserve officials closely monitor the JOLTS report as an indicator of labor market strength.
Data from the FedWatch tool website of the Chicago Mercantile Exchange (CME) showed that after the data release on Wednesday, the market’s probability of the Federal Reserve cutting rates by 50 basis points in the September meeting increased to nearly 50%, higher than the 38% predicted the day before.
Krishna Guha, head of global policy and central bank strategy team at New York financial institution Evercore ISI, said in a client note that while Wednesday’s release of the JOLTS report heightened concerns about economic slowdown, the new data “does not indicate any rapid deterioration in the labor market.”