The US labor market slumped as job openings declined, and layoffs were at the highest level in more than two years

WASHINGTON (Reuters) – U.S. job openings fell for the third straight month in March and layoffs rose to the highest level in more than two years, indicating some softening in the labor market that may help the Federal Reserve fight inflation.

However, the job market remains tight. The Monthly Job Opportunity and Employment Turnover Survey, or JOLTS report, from the Labor Department on Tuesday showed 1.6 job vacancies for every unemployed person in March. This was the lowest reading since October 2021 compared to 1.7 in February.

Federal Reserve officials, who kicked off a two-day policy meeting on Tuesday, are closely watching the rate, which remains above the 1.0-1.2 range that economists say is consistent with a jobs market that doesn’t generate much inflation.

The US central bank is expected to raise its benchmark interest rate by another 25 basis points to a range of 5.00%-5.25% on Wednesday before halting its fastest monetary tightening campaign since the 1980s.

“The decline in the jobless-to-unemployment ratio in the past three months represents a reduction in excess demand for labor that the Fed would welcome,” said Conrad D. Quadros, chief economic advisor at Brean Capital in New York.

“However, with the percentage still higher than at any time before November 2021, the labor market remains tight by historical standards.”

Job openings, a measure of labor demand, fell by 384,000 to 9.59 million on the last day of March, the lowest level since April 2021. February data was revised higher to show 9.97 million jobs instead of 9.93 million previously. Economists polled by Reuters expected 9.775 million jobs. It’s down 1.6 million since December.

The decline in March was concentrated in small businesses, with between one and 49 employees, the main drivers of explosive growth in the job market. There were 144,000 fewer vacancies in the transportation, warehousing and utilities industry.

Job openings in professional and business services decreased by 135,000. Retailers reported a decrease in job openings of 84,000. There was a marked decline in health care and social assistance, but educational services reported an additional 28,000 jobs. There were 34,000 government jobs.

Job openings declined in all four regions, with steep declines in the Midwest and West. The job openings rate fell to 5.8%, the lowest level since March 2021, from 6.0% in February.

Stocks on Wall Street traded lower as investors focused on Treasury Secretary Janet Yellen’s warning that the federal government could run out of money within a month amid a standoff to raise the $31.4 trillion borrowing cap. The dollar fell against a basket of currencies. US Treasury bond prices rose.

Demand is slowing

Employment was little changed at 6.1 million, with the employment rate unchanged at 4.0%. Economists expected the slowdown in labor demand to be repeated in the employment report for April, which is due for release on Friday.

Non-farm payrolls are expected to have increased by 179,000 jobs last month, the smallest increase since December 2020, after rising by 236,000 in March, according to a Reuters survey of economists.

A JOLTS report showed layoffs jumped from 248,000 to 1.8 million, the highest level since December 2020. The increase was led by the construction industry, which shed 112,000 positions. The decline likely reflects job losses in the housing market, which has been hit by higher mortgage rates.

Accommodation and food services lost 63,000 jobs, while the healthcare and social assistance category reported 42,000 layoffs. Employment in the leisure and hospitality sector remains below pre-pandemic levels.

Layoffs in professional and business services increased by 49,000. Small and medium-sized businesses accounted for the bulk of the layoffs. All four regions reported a rise in job losses.

The rate of layoffs and layoffs rose to 1.2%, the highest level since December 2020, from 1.0% in February.

With job opportunities steadily declining and layoffs increasing, fewer people are leaving their jobs voluntarily. Resignations fell to 3.85 million, the lowest level since May 2021, from 3.98 million in February.

Residency applications decreased in the accommodation and food services sector. They fell in the South and West, but rose in the Northeast and Midwest.

Quit rates, seen as a measure of confidence in the labor market, fell to 2.5% from 2.6% in February. It’s lower than the 2.9%-3.0% range seen in late 2021 and early 2022 when job-hopping was at its peak.

“Vacancy rates and resignations remain historically high, the layoff rate remains historically low, but all three are moving in the direction of a cooler labor market,” said Michael Feroli, chief US economist at JPMorgan in New York.

“Signs of labor market weakness will not be a game-changer at tomorrow’s Fed meeting, though they do suggest that the cumulative amount of policy tightening is beginning to have the desired effect on corporate labor demand.”

(Reporting by Lucia Mutecani) Editing by Andrea Ricci

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