According to government data released on 9/4, for the first time since 2021, the number of unemployed Americans exceeds the number of job openings.
The latest JOLTS report from the Bureau of Labor Statistics shows that the job openings rate per unemployed person has fallen below 1, at 0.99 in July. This is the lowest level since April 2021, when the rate was at 0.96.
Indeed economist Allison Shrivastava said: "The number of layoffs remains low. This indicates that the cause is not due to many people losing jobs, but mainly due to the decrease in the number of job openings."
In other words, the current challenge is not about ensuring jobs for those already employed, but rather the difficulty for the unemployed to return to the labor market after losing their jobs.
The number of job vacancies in the month reached 7.18 million. This figure is lower than the forecast of 7.38 million by economists and lower than the 7.36 million in June.
The decline in job vacancies has raised expectations that the Federal Reserve (Fed) will cut interest rates in September. According to CME FedWatch, on September 4, traders predicted a 95.6% chance of the Fed cutting interest rates, up from 91.7% earlier that day.
However, Wall Street economists believe that new data on the labor market is not necessarily a sign of recession.
Economist Tuan Nguyen of RSM wrote in the JOLTS report: "Although the labor market is clearly slowing down compared to the peak period, there are not many signs that a recession is imminent. When considering simultaneously the number of job vacancies, unemployment rate, and new jobs, current conditions are quite close to the long-term balance that the Fed aims for, which does not create inflationary pressure."
Meanwhile, senior economist Aditya Bhave of Bank of America noted that labor supply, measured by the labor force participation rate, is also weakening along with hiring demand.
The labor force participation rate in July fell to its lowest level since November 2022. According to Bhave, part of the reason is due to the aging U.S. population and the controversial immigration policies of the Trump administration.
"I think this is not a completely weak labor market, because when labor supply also cools down, it actually benefits those who are still looking for jobs," he told Yahoo Finance.
Economist Bhave also believes that the ratio of job vacancies to the number of unemployed is gradually decreasing rather than plummeting, and this is a positive signal for the economy.
"The labor market has cooled down this year. But it does not show signs of recession, which usually occurs very suddenly," he said.
He added that the key data for the Fed's upcoming interest rate decision is still pending. That is the August employment report, expected to be released this Friday.
According to Bhave, with the number of job vacancies in July lower than forecasted, the Fed will need an especially positive August employment report to have enough reason to keep interest rates unchanged at the next meeting.
According to Yahoo Finance