Demand for U.S. workers fell in February, a sign that the red-hot labor market continues to cool somewhat.
The drop in openings is a signal of a slowing labor market, but the report includes data that points to a still healthy environment for workers: Four million workers left their jobs during the month., A slight increase from January, and the number of layoffs fell to 1.5 million.
1.7 jobs opened for every unemployed worker in February, down from 1.9 in January. The Federal Reserve has been paying close attention to that rate as it looks to slow hiring as part of its effort to control inflation.
Until recent months, the number of available jobs had risen significantly as the economy recovered from the pandemic recession, with companies rushing to hire workers after public health restrictions were lifted.
“The general trend of JOLTS in recent months has been a gradual shift toward normal labor market dynamics,” said Julia Pollock, Chief Economist at ZipRecruiter. “It looks like it’s rebalancing. Employment was high in the stratosphere.
A gradual decline may be encouraging for policymakers. Central bank officials worry that a tight job market contributes to inflation because employers can pressure workers to raise wages to compete with them, and then pass the price hike on to consumers. Although borrowing costs are on the rise, the number of openings available remains high.
The central bank has raised interest rates from near zero to around 5 percent over the past year, making it more expensive for companies to expand and for consumers to spend. But it wants to avoid widespread layoffs or lasting damage to the labor market.
“We’re still in a strong market,” said Nick Bunker, director of economic research for North America at the Indeed Hiring Lab. But, he added, “the cool-off is now evident.”
A measure of inflation closely watched by the central bank – the Personal Consumption Expenditure Index – Price gains slowed significantly in February to 5 percent year-on-year, down from 5.3 percent in January.
Despite the high level of job cuts in the tech sector, overall layoffs are historically low, a sign that employers may be reluctant to part with workers hired during the pandemic. The number of workers voluntarily leaving their jobs – a sign of hope they will find work elsewhere – rose to four million in February.
“The layoffs we’re seeing all over the media in tech and finance are offset by the lack of layoffs and layoffs in the Main Street economy,” Ms. Pollock said. “Labor-market dynamics are still very favorable for workers,” he said.
JOLTS is considered a lagging indicator, saying more about recent past conditions than providing information about what may come. On Friday, the Labor Department will release employment data for March. Economists surveyed by Bloomberg said employers added about 240,000 jobs, a slight slowdown from February, but the report expected the hiring pace to reflect a strong labor market.