Jobs Fell in August From Record Levels

According to multiple news sources, the number of available jobs in the US plummeted in August compared to July. The drop in numbers signifies that businesses may pull back further on hiring and potentially cool high inflation. 

About 10.1 million positions were open at the end of the summer, down from 11.2 million in July, the Labor Department reported last week. Specifically, there were nearly 1.7 unemployed workers for each available job, about the highest proportion on record.

Hires and total separations decreased slightly at 6.3 million and 6 million, respectively. Within separations, quits (4.2 million) and layoffs and discharges (1.5 million) were little changed. The most significant decreases in job openings were in healthcare and social assistance (-236,000), other services (-183,000), and retail trade (-143,000). 

Pre-Pandemic Employment

The US has posted strong job growth over the last year, but the total number of employed Americans has remained below its pre-pandemic level. 

“The numbers are still not anything like what we saw pre-pandemic. It’s cooling from a boil to a rolling simmer. And that’s not enough,” Diane Swonk, chief economist at the accounting firm KPMG, stated.

For example, the leisure and hospitality sector hired 96,000 workers between June and July 2022, while the government sector added 57,000 jobs. Still, employment in these sectors remains well below pre-pandemic levels, with leisure and hospitality short 1.2 million workers compared to February 2020, and government jobs down by nearly 600,000. 

Additionally, employment in the education and health services sector has 103,000 fewer workers.

“Simply put, companies slashed payrolls by more than was necessary during the height of the pandemic and are struggling to restore staffing levels to where they were before COVID-19 hit,” Bob Schwartz, an Oxford Economics senior economist, stated earlier this month. 

The Federal Reserve to Reduce Worker Demand

The Federal Reserve is actively working to reduce worker demand by raising its short-term interest rate. While workers typically welcome larger raises, the agency sees the current pace of wage increases (6.5 percent a year) as unsustainably high and a key driver of inflation.

Jerome Powel, chair of the Federal Reserve, and other Federal officials hope that their interest rate hikes — the fastest in roughly four decades — will cause employers to slow their efforts to hire more people. 

Officials believe fewer job openings should reduce the pressure on companies to raise pay to attract and keep workers. Smaller pay increases, if sustained, could ease inflationary pressures.

“This effort helps bring that inflation pressure down and reassures the Federal Reserve that maybe there is a road out of this without dramatically pushing up the unemployment rate,” Derek Tang, an economist at LHMeyer, said in a statement.

Christopher Waller, a member of the central bank’s Board of Governors, also argued that the Federal rate hikes might be able to reduce job openings and inflation pressures without causing widespread job losses. But former Treasury Secretary Larry Summers and former IMF chief economist Olivier Blanchard stated that such an outcome is unlikely, based on past trends. 

They found that when job openings fall, layoffs and unemployment typically rise. 

Economists forecast that near future data will show that employers will add 250,000 jobs in October and that the unemployment rate will remain at 3.7% for a second straight month.