WASHINGTON(Reuters) – U.S. job openings fell to a three-year low in March, while the number of people quitting their jobs declined, signs of easing labor market conditions that over time could aid the Federal Reserve’s fight against inflation.
The Job Openings and Labor Turnover Survey, or JOLTS report from the Labor Department on Wednesday was, however, tempered somewhat by other data showing a measure of prices paid by manufacturers for raw materials jumped to the highest level in nearly two years in April as commodity prices increased.
Falling goods prices were the major driver of the moderation in inflation last year. With price pressures picking up in the first quarter, the surge in input costs is unwelcome news. Fed officials on Wednesday kept the U.S. central bank’s benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July.
Policymakers signaled they were still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings.
The Fed has raised its policy rate by 525 basis points since March 2022. Financial markets have pushed back the expected timing of a rate cut this year to September from June.
“Continued cooling in the labor market is part of the Fed’s plan to help return inflation to 2%, with job openings serving as one of the Fed’s barometers,” said Mark Streiber, an economic analyst at FHN Financial. “While it is too early to say that the easy goods disinflation we experienced in 2023 is over, upward pressure on goods is an unwelcome development for the Fed.”
Job openings, a measure of labor demand, were down 325,000 to 8.488 million on the last day of March, the lowest level since February 2021, the Labor Department’s Bureau of Labor Statistics said. Data for February was revised slightly higher to show 8.813 million unfilled positions instead of the previously reported 8.756 million.
Economists polled by Reuters had forecast 8.686 million job openings. Vacancies peaked at a record 12.182 million in March 2022. There were 1.32 job openings for every unemployed person, down from 1.36 in February. This ratio averaged 1.19 in 2019, indicating the labor market is gradually cooling.
March’s decline in job openings was led by construction, with 182,000 fewer unfilled positions. Vacancies decreased by 158,000 in finance and insurance. But job openings rose by 68,000 in state and local government education.
The decrease in job postings was concentrated in the West and Midwest. There were also fewer open positions in the South, which has experienced robust employment growth. Job postings increased in the Northeast. Demand for labor dropped considerably among small businesses with one to nine employees and establishments with 50 to 249 workers.
Small businesses have accounted for much of the increase in hiring following the pandemic. Declining vacancies led some economists to anticipate a sharp slowdown in overall job growth in the second quarter. The job openings rate fell to 5.1%, the lowest since January 2021, from 5.3% in February.
Employment is, however, expected to remain positive this year, keeping the economic expansion on track.
Stocks on Wall Street pared losses following the Fed’s rate decision. The dollar was steady against a basket of currencies. U.S. Treasury prices rose.
MANUFACTURING FALTERS
Hiring dropped 281,000 to 5.500 million in March and the hires rate fell to 3.5% from 3.7% in February.
Layoffs decreased 155,000, the most in nearly a year, to 1.526 million. That was the lowest level since December 2022, pointing to a solid labor market. Low layoffs have accounted for solid job growth.
“Companies have shifted their focus from addressing staffing shortages by aggressively recruiting new workers to more proactively retaining the workers they have,” said Julia Pollak, chief economist at ZipRecruiter.
The number of people quitting their jobs dropped 198,000 to 3.329 million in March, the lowest level since January 2021. The decline in resignations was concentrated in trade, transportation and utilities, as well as other services.
The quits rate, viewed as a measure of labor market confidence, slipped to 2.1%, which was the lowest since August 2020 and followed 2.2% in February.
It soothed fears of a resurgence in wage growth after labor costs surged in the first quarter. Nonetheless the outlook for inflation remains challenging.
A survey from the Institute for Supply Management (ISM) on Wednesday showed its measure of prices paid by manufacturers for inputs shot up to 60.9 in April, the highest reading since June 2022, from 55.8 in March. That partly reflected higher oil prices. The overall ISM manufacturing PMI dropped to 49.2 last month from 50.3 in March, which was the highest and first reading above 50 since September 2022.
A PMI reading above 50 indicates growth in the manufacturing sector, which accounts for 10.4% of the economy.
“Oil prices have since returned to levels from the end of March, though they are likely to remain supported by resilient global demand as the outlook for China and the U.S. improves,” said Matthew Martin, U.S. economist at Oxford Economics.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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