U.S. job openings sink amid higher rates and slower growth

A banner that says "Now Hiring"
A banner outside a post office in St. Paul advertises open positions with the United States Postal Service on Aug. 8. The number of available jobs in the U.S. plummeted in August compared with July
Andrew Krueger | MPR News file

The number of available jobs in the U.S. plummeted in August compared with July, a sign that businesses may pull back further on hiring and potentially cool chronically high inflation.

There were 10.1 million advertised jobs on the last day of August, the government said Tuesday, down a huge 10 percent from 11.2 million openings in July. In March, job openings had hit a record of nearly 11.9 million.

Layoffs ticked up in August but remained at a historically low level, according to the report, known as the Job Openings and Labor Turnover survey, or JOLTS. And slightly more people quit their jobs, in most cases likely for better jobs elsewhere.

The sharp drop in job openings will be welcomed by the Federal Reserve, which is hoping to reduce the demand for workers by raising its key short-term interest rate. While workers typically welcome larger raises, the Fed sees the current pace of wage increases — at about 6.5% a year, according to some measures — as unsustainably high and a key driver of inflation.

Chair Jerome Powell and other Fed officials hope that their interest rate hikes — the fastest in roughly four decades — will cause employers to slow their efforts to hire more people. Fewer job openings, in turn, could reduce the pressure on companies to raise pay to attract and keep workers.

“This helps bring that inflation pressure down and reassures the Fed that maybe there is a road out of this without dramatically pushing up the unemployment rate,” said Derek Tang, an economist at LHMeyer, an economic research firm.

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Smaller pay raises, if sustained, should ease inflationary pressures. In their effort to combat the worst inflation in 40 years, the central bank has raised its key short-term interest rate to a range of 3 percent to 3.25 percent, up sharply from nearly zero as recently as March.

Powell has warned that the central bank's rate hikes will likely lead to higher unemployment and potentially a recession. Still, he and other Fed officials have held out hope for what they call a “soft landing” — in which the economy slows enough to curb inflation but not so much as to cause a recession.

Christopher Waller, a member of the central bank's Board of Governors, has argued that the Fed's rate hikes may be able to reduce job openings and therefore inflation pressures without causing widespread job losses. But former Treasury Secretary Larry Summers and former IMF chief economist Olivier Blanchard have written that such an outcome is unlikely, based on past trends. When job openings fall, layoffs and unemployment typically rise, they found.

Tuesday's figures arrive the same week that a key report on jobs and the unemployment rate is set to be released Friday. Economists forecast that it will show that employers added 250,000 jobs in September and that the unemployment rate remained 3.7 percent for a second straight month.