Lucia Mutikani
WASHINGTON (Reuters) – U.S. job openings rose in May after recording sharp declines in the previous two months, continuing a trend that reflects easing labor market conditions and raising the possibility that the Federal Reserve may cut interest rates this year.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) report released Tuesday showed that there were 1.22 job openings per unemployed person in May, unchanged from April and the lowest job openings-to-unemployment ratio since 2021. The April ratio was previously estimated at 1.24. The ratio is not far from the 2019 average of 1.19.
“The data suggests that labor demand and supply are beginning to normalize,” said Rubeela Farooqui, chief U.S. economist at High Frequency Economics. “From a policy perspective, the Fed’s challenge going forward is to keep interest rates at a level that not only keeps inflation in check but also prevents unnecessary damage to the labor market.”
The number of job openings, a gauge of labor demand, rose by 221,000 to 8.14 million at the end of May, according to the Labor Department’s Bureau of Labor Statistics. The April data was revised down to 7.919 million unfilled jobs, down from 8.059 million in the previous report. Economists surveyed by Reuters had expected 7.91 million job openings in May.
Unfilled positions reached a record high of 12.182 million in March 2022, down 1.2 million over the past year.
State and local government, excluding education, added 117,000 new job openings. Durable goods manufacturing added 97,000 jobs, and the federal government added 37,000. However, accommodation and food services saw a decline of 147,000 unfilled jobs, and private education services saw a decline of 34,000 jobs.
A gradual improvement in the labor market and subdued inflation have brought the U.S. central bank closer to starting an easing cycle, with financial markets still watching for a first interest rate cut in September. The Fed has kept its benchmark overnight interest rate at the current range of 5.25% to 5.50% since July last year. The central bank has raised interest rates by 525 basis points since 2022 to curb inflation.
Federal Reserve Chairman Jerome Powell said Tuesday that policymakers want to see more evidence that inflation is subsiding before cutting borrowing costs.
Stocks on Wall Street were mixed. The dollar was stable against a basket of currencies. Treasury prices rose.
Job growth
The number of job openings in businesses with 1-9 employees fell by 119,000. Small businesses are the largest driver of employment growth, and this decline portends slower job growth going forward. However, the number of unfilled job openings in businesses with 1-9 employees increased by 87,000.
The number of employees is between 10 and 49. Job openings have increased not only in large establishments but also in medium-sized companies.
The declines in job openings were seen in the South, which saw the largest employment gains. Job openings increased in the Midwest, Northeast and West.
The job openings rate rose to 4.9 percent from 4.8 percent in April. Employment increased by 141,000 to 5.756 million, led by growth in professional and business services and construction. However, retail trade, accommodation and food services, and manufacturing all saw declines in employment. Employment is down 415,000 over the year. The employment rate rose to 3.6 percent from 3.5 percent in April.
Layoffs rose by 112,000 to 1.654 million, driven by job losses in professional and business services, leisure and hospitality, and other services, but layoffs fell in manufacturing. The layoff rate remained steady at 1.0 percent for the third straight month.
The layoffs took place mainly in businesses with 1 to 9 employees and establishments with 250 to 999 employees, and were concentrated in the South.
Fewer workers are switching jobs because the labor market is not as tight as it once was.
The total number of people leaving their jobs was little changed at 3.459 million, but trade, transport, public works, finance, professional and business services and leisure and hospitality saw increases in layoffs.
The jobless rate, a gauge of labor market confidence, remained steady at 2.2% for the seventh consecutive month. A stable jobless rate suggests wage pressures will moderate going forward, which is a positive sign for the overall inflation outlook.
A recent study from the Bank of America Research Institute found that job-switching rates remain higher than in 2019. However, the study noted that “salary increases from job switching are slightly below 2019 levels, which may suggest that the balance of bargaining power is shifting slightly more in favor of workers, especially for middle- and upper-income job switchers.”
“The labor market appears healthy enough for now that the Fed can wait for further data to confirm that inflation is back on track toward 2 percent before cutting rates,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics.