Amid Expectations of 'End of Tightening,' US Job Openings Hit Lowest in Over 2 Years

As the Federal Reserve's (Fed) tightening that has lasted for over a year is now believed to be nearing its end, the number of job openings in June also fell to the lowest level in over two years. The manufacturing sector continued its contraction.

According to the Job Openings and Labor Turnover Survey (JOLTs) released by the U.S. Department of Labor on the 1st (local time), job postings in June totaled 9.58 million, slightly down from 9.61 million in the previous month. This is the lowest level since April 2021 (9.29 million) and also below FactSet's estimate of 9.7 million. By industry, jobs decreased in transportation and warehousing, education, and other sectors.

These indicators are seen as showing that the U.S. labor market is gradually cooling down. However, historically, the levels remain high. Steven Stanley, chief economist at Santander Bank, told the Wall Street Journal (WSJ), "What we are seeing is not a dramatic collapse of the labor market but a pattern of 'gradual slowdown.'"

The number of job openings per available worker was identified as 1.6. Layoffs slightly eased from 1.55 million in May to 1.53 million in June. The number of voluntary quits, which reflects labor market confidence, was 3.77 million, down by 295,000 from the previous month. Despite the slowdown in hiring, it was confirmed that companies are also reluctant to lay off workers. Rachel Sederberg, chief economist at Lightcast, told CNBC, "Compared to pre-pandemic levels, there are still many job openings. There is still a long way to go," but added, "It is moving in the right direction." Nick Bunker, head of economic research at Indeed Hiring Lab, diagnosed it as "a sign that everything is going well."

[Image source=AP Yonhap News]

The U.S. manufacturing indicators released on the same day also continued to show contraction. The Institute for Supply Management (ISM) reported that the July Manufacturing Purchasing Managers' Index (PMI) was 46.4, below the market forecast of 46.9. Remaining below the baseline of 50, it marked the ninth consecutive month of contraction. ISM Chairman Timothy Fiore stated in a release, "Demand remains weak but slightly improved compared to June, and production slowed," adding, "There are signs that more job cuts will occur in the near future." The S&P Global July manufacturing PMI recorded 49, improving from 46.3 in the previous month but still below 50. Chris Williamson, chief economist at S&P Global, assessed that "manufacturing is holding back the U.S. economy."

These indicators have attracted investors' attention amid growing expectations of a soft landing for the economy and speculation that the Fed's tightening may end early. Previously released inflation data showed a clear slowdown, supporting these early tightening expectations. Later this week, the Department of Labor will release the employment report. Wall Street expects an increase of 200,000 jobs. Austan Goolsbee, president of the Federal Reserve Bank of Chicago and a prominent dove within the Fed, emphasized in foreign media interviews on consecutive days that "no decision has been made about what to do in September," stating that he will "watch additional indicators such as the employment report and the Consumer Price Index (CPI)." He also said that a "golden path" to reduce inflation without a recession is possible.

Currently, the market largely expects the Fed to hold rates steady in September. Last month, the Fed raised U.S. interest rates to the highest level in 22 years, 5.25-5.5%, through an additional baby step (a 0.25 percentage point increase). Although Fed Chair Jerome Powell left open the possibility of further rate hikes, recent indicators such as slowing inflation and easing wage pressures point toward a pause signal.

Douglas Porter, chief economist at the Bank of Montreal, said, "Our core view is that the Fed has done enough," diagnosing that "core inflation has started to slow, and the labor market is easing from the margins." Anna Wong, senior economist at Bloomberg Economics, reaffirmed the September rate hold forecast, saying, "The labor market, which Powell has identified as key to easing inflation, is softening."

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market on the afternoon of the day reflected more than an 82% chance that the Fed will hold rates steady at the next September FOMC meeting. Although the dot plot presented by the Fed in June allows for one more rate hike this year, the market currently favors a hold scenario through the end of the year. The probability of an additional hike this year was only in the 27% range.

This content was produced with the assistance of AI translation services.