Job openings plunged but hiring remained strong in August

U.S. job openings dropped sharply in August, according to Labor Department data released Tuesday, falling at the fastest one-month pace since March 2020.

Businesses still hired employees at a steady pace and kept layoffs near historic lows in August, according to the Job Openings and Labor Turnover report. But firms also cut back their postings for open jobs, a possible sign of businesses bracing for an economic slowdown.

The number of open jobs listed in the U.S. fell from 11.2 million in July to 10.1 million in August, a decline of 1.1 million job openings, according to the Labor Department. Job openings are now well below a record of 11.4 million set in December 2021. 

Hiring remained strong even as businesses reduced their job openings, with firms adding roughly 6.3 million new employees in August, slightly higher than July’s gain of 6.2 million.

The number of workers laid off from their jobs in August ticked higher from July, rising to 1.6 million from 1.5 million in the previous month, but remained low overall. 

The labor market remained stacked in favor of workers in August, a month during which the U.S. added 315,000 jobs and saw the jobless rate rise thanks to an influx of job-seekers off the sidelines. Roughly 4.2 million Americans quit their jobs in August, slightly higher than in July, with the vast majority likely headed to new gigs with either better compensation or career opportunities. 

Even so, the steep decline in job openings could sap opportunities for workers — and their leverage to get higher wages — as the Federal Reserve slams the brakes on a historically strong labor market.

“The Federal Reserve is aggressively raising interest rates in order to reduce demand for goods, services, and labor, and the August JOLTS report suggests those actions are finally denting the labor market,” wrote Julia Pollak, chief economist at ZipRecruiter, in a Tuesday analysis.

“The number of vacancies is now the lowest it has been since June 2021, with vacancies slowing across all company size categories.”

A steady decline in job openings may take some of the steam out of inflation. Fewer open jobs means businesses may have an easier time filling other positions as jobseekers have increasingly limited options. That could allow firms to hire workers at lower wages, which would help reduce inflation.

Fed Chair Jerome Powell and many economists believe the U.S. job market has been too strong inflation to fall. He has argued for months that the Fed must bring the labor market into “balance” before inflation could fall back to normal levels, which means reducing the number of job openings to a point that may lead to a stall in hiring.

“If we want to light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn’t,” Powell said last month after the Fed issued another steep rate hike.

Updated at 11:16 a.m.