U.S. labor market slows as job vacancies continue to decline
The U.S. labor market is showing signs of weakness after the JOLTS report from the Department of Labor revealed that job openings in July dropped to 7.18 million, the lowest level in ten months, and down by more than 300,000 positions over the past two months. This figure was significantly lower than economists’ expectations, reflecting slowing labor demand and increasing pressure on the Federal Reserve (Fed) to move quickly to cut interest rates.
The decline was concentrated in several sectors, especially healthcare and social assistance, which lost 181,000 positions, retail down 110,000 positions, and the entertainment sector down 62,000 positions. Although some sectors such as construction, manufacturing, and financial services added jobs, it was not enough to offset the overall losses. As a result, the job openings rate fell to 4.3% from 4.4% in the previous month.
U.S. Labor Market Slows Gradually
Sarah House, Senior Economist at Wells Fargo, sees this as a gradual slowdown in what is still a strong labor market. However, she noted that weaker consumer spending and costs from tariff measures may push businesses to reduce expenses, with labor becoming one of the main targets.
Although new hires increased slightly by 41,000 to 5.31 million, the hiring rate remained steady at 3.3%. Layoffs rose slightly to 1.81 million, but still remained low compared to the size of the economy. Analysts believe that the relatively low level of layoffs shows employers are holding on to workers even as demand decreases.
Expectations and Fed Policy Signals
The market expects the upcoming nonfarm payroll report to show an increase of only 75,000 jobs in August, below the average of 123,000 jobs per month seen last year. The unemployment rate is expected to rise to 4.3%.
Fed Chair Jerome Powell has already signaled that the Fed may need to cut interest rates at the mid-September meeting if risks in the labor market continue to grow.
However, some economists remain positive, pointing out that the decline mainly reflects the healthcare sector and does not indicate overall weakness. At the same time, the voluntary quit rate remained at 2%, showing that workers are not confident enough to change jobs and have lost bargaining power compared to the post-COVID period.
Vulnerability and Economic Impact
A cooling labor market could be a double-edged sword. On one hand, it helps reduce inflationary pressures, but on the other hand, it reflects the fragility of U.S. economic growth.
If the Fed responds too slowly, confidence in the labor market and consumer spending could decline more deeply than expected.
If the Fed responds too slowly, confidence in the labor market and consumer spending could decline more deeply than expected.
If the Fed responds too slowly, confidence in the labor market and consumer spending could decline more deeply than expected.
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- Popular Tag | us jobs trends, us labor market
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