US job openings unexpectedly rose in August, signaling continued resilience in the labor market.
According to a report released by the Labor Department on Tuesday, employers listed 8 million job vacancies in August, an increase from 7.7 million in July. This rise came as a surprise to economists, who had anticipated little change in the openings.
The increase in job openings was primarily driven by gains in the construction sector, which added 138,000 vacancies, and state and local government jobs, which saw an increase of 78,000 openings. Layoffs in August also fell, although the number of workers quitting their jobs decreased to the lowest level since August 2020—a reflection of declining confidence in job prospects.
Job openings have steadily decreased from a peak of 12.2 million in March 2022 but remain above pre-pandemic levels. The robust demand for labor following the COVID-19 lockdowns had initially caused inflation to surge, prompting the Federal Reserve to raise interest rates 11 times in 2022 and 2023 to tame inflation. As inflation declined from a peak of 9.1% in June 2022 to 2.5% in August, the economy demonstrated resilience against the Fed’s aggressive monetary policy, avoiding a predicted recession.
Despite these developments, the labor market has shown signs of cooling, with average hiring rates plummeting to just 116,000 net new jobs per month from June to August— the lowest three-month average since mid-2020. Forecasts for the upcoming jobs report, expected on Friday, project that employers added approximately 143,000 jobs in September, while the unemployment rate is anticipated to remain steady at a low 4.2%.
The Federal Reserve, content with progress made against inflation yet wary of the softening job market, recently cut its benchmark interest rate by half a percentage point—its first significant reduction since March 2020.
“Job openings had a big gain, and while these numbers are volatile, it’s likely employers see falling interest rates spurring the economy and may want to staff up,” noted Robert Frick, an economist with Navy Federal Credit Union.
Despite the increase in job openings, fewer workers are quitting their jobs, which indicates a cooling labor market. The quits rate fell to 3.1 million in August from 3.2 million the previous month, marking the lowest level in four years. The percentage of workers quitting also dipped to 1.9%, well below pre-pandemic levels. The hiring rate declined to 3.3%, the lowest reading in 11 years, when excluding the pandemic period.
While the rise in job openings could be seen as a positive indicator, the overall trend points to a labor market that has cooled significantly from the rapid recovery phase following the pandemic. The unemployment rate has increased from a low of 3.4% to 4.2% as hiring slows, and around 1.3 million people have joined the labor force since January, with only 282,000 finding employment.
Looking ahead, the labor market remains a crucial factor for the Federal Reserve as it navigates economic policy. While the current job market appears more subdued than it was a year ago, the low rate of layoffs—currently at 1.0%—continues to provide some stability.
“The labor market we see now is much cooler than the one we had a year ago, slowed in part by the effects of high interest rates over time. These effects will continue to impact firms and employees, even as the Fed has begun cutting rates,” stated Elizabeth Renter, a senior economist at NerdWallet.
As market reactions unfolded, both the Dow Jones Industrial Average and S&P 500 saw declines in Tuesday trading.
With input from the Associated Press, Market Watch, and Bloomberg.
