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US job openings drop; layoffs hit highest level in more than two years

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An employee hiring sign with a QR code is seen in a window of a business in Arlington, Virginia, U.S., April 7, 2023. REUTERS/Elizabeth Frantz

U.S. job openings fell for a third straight month in March and layoffs increased to the highest level in more than two years, suggesting some softening in the labor market that could aid the Federal Reserve’s fight against inflation.

Still, the labor market remains tight, with the monthly Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday showing 1.6 vacancies for every unemployed person in March. That compared to 1.7 in February.

Fed officials, who started a two-day policy meeting on Tuesday, are closely watching this ratio. The U.S. central bank is expected to raise its benchmark overnight interest rate by another 25 basis points to the 5.00%-5.25% range on Wednesday before potentially pausing its fastest monetary policy tightening campaign since the 1980s.

“The decline in the ratio of job vacancies to unemployment in the last three months represents a reduction in the excess demand for labor that will be welcomed by the Fed,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

“However, with the ratio still higher than at any time prior to November 2021, the labor market is still tight by historical standards.”

Job openings, a measure of labor demand, fell 384,000 to 9.59 million on the last day of March, the lowest level since April 2021, Data for February was revised higher to show 9.97 million job openings instead of the previously reported 9.93 million. Economists polled by Reuters had forecast 9.775 million job openings.

Job openings have dropped by 1.6 million since December.

There were 144,000 fewer vacancies in the transportation, warehousing and utilities industry, but educational services reported an additional 28,000 job openings. The job openings rate fell to 5.8% from 6.0% in February.

U.S. stocks were trading lower. The dollar slipped against a basket of currencies. U.S. Treasury prices rose.

Hiring was little changed at 6.1 million, keeping the hiring rate unchanged at 4.0%. Layoffs jumped by 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 reflected the job losses in the housing market, which has been hammered by higher mortgage rates.

The accommodation and food services lost 63,000 jobs, while the health care and social assistance category reported 42,000 layoffs. The layoffs and discharge rate rose to 1.2% from 1.0% in February.

With job openings steadily declining and layoffs rising, fewer people are voluntarily quitting their jobs. Resignations dropped to 3.85 million, the lowest level since May 2021, from 3.98 million in February.

The quits rates, which is viewed as a measure of labor market confidence, dipped to 2.5% from 2.6% in February. It is down from the 2.9%-3.0% range seen in late 2021 and early 2022 when job hopping was at its peak.

“The job openings and quits rates remain historically high, and the layoff rate remains historically low, but all three are moving in the direction of a cooler labor market,” said Michael Feroli, chief U.S. economist at JPMorgan in New York.

“The signs of labor market softness won’t be a game-changer for tomorrow’s Fed meeting, though they do suggest that the cumulative amount of policy tightening is starting to have its desired effect on businesses’ labor demand.”

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