WASHINGTON, Aug 1 (Reuters) – U.S. job openings fell to the lowest level in more than two years in June but remained at levels consistent with tight labor market conditions despite the Federal Reserve’s hefty interest rate increases.
The Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday also showed layoffs and discharges declined for a third straight month. Employers are hoarding workers after difficulties finding labor during the COVID-19 pandemic.
There were 1.6 job openings for every unemployed person in June, little changed from May. Labor market resilience suggests the Fed could keep rates higher for longer. The U.S. central bank has hiked its policy rate by 525 basis points since March 2022 to lower high inflation.
“While today’s report discusses data from June, this continued strength in the labor market is likely to keep Fed officials hawkish,” said Eugenio Aleman, chief economist at Raymond James.
Job openings, a measure of labor demand, dropped 34,000 to 9.582 million as of the last day of June, the lowest level since April 2021. Economists polled by Reuters had forecast 9.610 million job openings.
There were an additional 136,000 job openings in healthcare and social assistance, while vacancies increased by 62,000 in state and local government, excluding education.
Transportation, warehousing and utilities had 78,000 fewer open positions. Unfilled jobs in state and local government education dropped by 29,000, while the federal government had 21,000 fewer vacancies.
The job openings rate was unchanged at 5.8% in June. Hiring dropped 326,000 to 5.905 million. That lowered the hires rate to 3.8% from 4.0% in May. The decline in hiring was concentrated in durable goods manufacturing as well as finance and insurance.
Layoffs and discharges fell 19,000 to 1.527 million.
Despite the labor market’s resilience, workers are showing less appetite to seek greener pastures. Resignations dropped 295,000, the most since during the first wave of the pandemic, to 3.772 million. As a result, the quits rate, viewed as a measure of labor market confidence, fell to 2.4% from 2.6% in May.
U.S. stocks were trading lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
MANUFACTURING STABILIZING
While the labor market remains defiant, higher borrowing costs are hurting manufacturing, though factory activity appeared to stabilize at weaker levels in July.
The Institute for Supply Management (ISM) said in a separate report that its manufacturing PMI edged up to 46.4 last month from 46.0 in June, which was the lowest reading since May 2020.
It was the ninth straight month that the PMI stayed below the 50 threshold, which indicates contraction in manufacturing, the longest such stretch since the 2007-2009 Great Recession. Economists had forecast the index would rise to 46.8.
While the ISM survey continues to offer a grim assessment of manufacturing conditions, so-called hard data suggest the sector is shuffling along. Fed data last month showed factory production rebounded in the second quarter, ending two straight quarterly declines.
The government reported last week that business spending on equipment grew solidly in the second quarter after slumping in the prior two quarters. Manufacturing accounts for 11.1% of the economy. Spending on long-lasting manufactured goods has slowed after booming during the pandemic, with services like airline travel and visits to amusement parks now in favor.
The ISM survey’s forward-looking new orders sub-index increased to 47.3 in July, the highest reading since October 2022, from 45.6 in June. The outlook for orders is improving as demand for goods holds up, encouraging businesses to rebuild inventories. Inventories for factories and customers remained low in July, which bodes well for future production.
Weak orders are keeping prices for inputs subdued. The survey’s measure of prices paid by manufacturers rose to a still-low 42.6 in July from 41.8 in June amid the significant improvement in supply chains.
According to the ISM, the delivery performance of suppliers to manufacturing firms has been faster for 10 straight months. Goods disinflation is helping to dampen price pressures in the economy, with annual inflation decelerating sharply in June.
With orders still depressed, factory employment is shrinking. In June, the ISM reported that companies “began using layoffs to manage head counts, to a greater extent than in prior months.” That practice probably gathered momentum in July. The survey’s gauge of factory employment dropped to 44.4, the lowest reading since July 2020, from 48.1 in June.
It has, however, not been a reliable predictor of manufacturing employment in the government’s nonfarm payrolls count. Factory employment has largely increased this year.
Manufacturing employment likely rose by 5,000 jobs last month, according to a Reuters survey of economists. Overall nonfarm payrolls are forecast to rise by 200,000 jobs in July after increasing by 209,000 in June. The Labor Department is due to release the employment report for July on Friday.
Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao
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