In March, job vacancies in the United States dropped to their lowest level in three years, while resignations also decreased. These signs indicate a softening labor market condition, which over time will help the Federal Reserve combat inflation.
However, the Job Openings and Labor Turnover Survey (JOLTS) released by the Labor Department on Wednesday (May 10) was offset by other data, showing that input costs paid by manufacturers in April surged to their highest level in nearly two years.
The decline in commodity prices was a major reason for the slowdown in inflation last year. The sharp increase in input costs as pressure on prices rebounded in the first quarter is unwelcome news.
On Wednesday, Federal Reserve officials kept the federal funds rate of the U.S. central bank unchanged in the current range of 5.25% to 5.50%.
After the Federal Reserve announced its rate decision, Wall Street stocks narrowed their losses. The U.S. dollar remained stable against a basket of currencies, while U.S. Treasuries rose in price.
Since March 2022, the Federal Reserve has raised policy rates by 525 basis points. Financial markets have shifted expectations for a rate cut from June to September this year.
Reuters quoted Mark Streiber, an economic analyst at FHN Financial, as saying, “The continued cooling of the labor market is part of the Fed’s efforts to help bring inflation back to the planned 2%, and job vacancies are one of the Fed’s barometers.”
The U.S. Department of Labor’s Bureau of Labor Statistics stated that job vacancies measuring labor demand decreased by 325,000 on the last day of March to 8.488 million, the lowest level since February 2021. The data for February was slightly revised to 8.813 million.
Job vacancies hit a record high of 12.182 million in March 2022. In March this year, there were 1.32 job vacancies for every unemployed person, down from 1.36 in February. This ratio averaged 1.19 in 2019, indicating a gradual cooling of the labor market.
The main reasons for the decrease in job vacancies in March were in the construction industry, which saw a reduction of 182,000 vacancies. Job vacancies in finance and insurance decreased by 158,000. However, vacancies in the education departments of state and local governments increased by 68,000.
The decrease in job vacancies was mainly concentrated in the western and midwestern regions. Vacant positions in the strong job growth southern region also decreased. Recruiting positions in the northeast increased. There was a significant decrease in labor demand from small businesses with 1 to 9 employees and businesses with 50 to 249 employees.
Resignations in March decreased by 198,000 to 3.329 million, the lowest level since January 2021. The decline in resignations was mainly seen in trade, transportation, utilities, and other services.
The resignation rate, seen as an indicator of labor market confidence, dropped to 2.1%, the lowest since August 2020, from 2.2% in February.
This alleviates concerns about wage growth rebounding after the surge in labor costs in the first quarter. However, the outlook for inflation still poses challenges.
Nevertheless, it is expected that the employment rate will continue to grow positively this year, thereby keeping the economic expansion on track.