September 27, 2022

The number of jobs in the United States fell sharply in June as the Federal Reserve raised interest rates, natural gas prices hit record highs, inflation soared and growth in consumer spending slowed.

There were 10.7 million job postings on the last business day of June, the U.S. Bureau of Labor Statistics said on Tuesday, up from 11.3 million revised upward a month earlier.

Economists had expected 11.1 million jobs in the June report on the Government Jobs and Turnover Survey, or JOLTS. The steeper-than-expected decline shows that demand for labor has sunk faster than economists expected.

The Federal Reserve is trying to cool the labor market by raising interest rates. In mid-June, the Fed raised its interest rate target by 0.75 basis points, the largest increase since 1994. Tighter economic conditions can slow business expansion, reducing demand for workers. Fed Chairman Jerome Powell said he would welcome a fall in job vacancies as a sign that the Fed’s efforts to tame inflation are paying off.

Openings fell sharply in both retail trade and construction, two sectors that have shown signs of easing in recent months. Consumer spending rose 1.1 percent in June before adjusting for inflation, according to the Commerce Department’s consumer spending count released last week. Real spending, after adjusting for inflation, was just 0.4 percent higher — and much of that increase reflected higher food and grocery prices. Spending on discretionary goods and services likely fell in inflation-adjusted terms.

Hiring rates fell at large firms with more than 1,000 employees, the government said. This suggests that businesses are preparing for an economic downturn by holding back on hiring new workers.

The number of openings reached an all-time high in March at 11.7 million. The ratio of open jobs to the unemployed — which economists see as a sign of labor market tightness — hit a record high of nearly two to one in March. It has been declining each subsequent month, although falling unemployment has softened some of the impact of lower exposures. The decline in openings in June was somewhat offset by a decline in unemployment, bringing this ratio down from nearly 1.9 in May to 1.8. This shows that the labor market remains extremely tight by historical standards.

The reduction in jobs came from the withdrawal of positions by employers. Hiring was little changed at 6.4 million. Departures were also flat at 4.2 million. The resignation rate remained unchanged at 2.8%.

Layoffs were little changed at 1.3 million. The layoff rate remained steady at 0.9%.

Retail store openings fell significantly from 1.185 million to 842,000, a drop of nearly 29%. Hiring rose to 803,000 from 791,000. This suggests a significant slowdown in hiring among retailers.

Manufacturing job postings fell from 816,000 in May to 790,000. Hiring rose to 475,000 from 468,000. Durable goods manufacturing openings rose from 505,000 to 510,000, but hiring fell from 249,000 to 242,000. Non-durable good manufacturers were looking for 280,000 workers at the end of June, up from 311,000. Hiring rose to 233,000 from 219,000.

Leisure and hospitality openings fell from 1.542 million to 1.451 million, a sharp decline of 5.9%. In the accommodation and food service sector openings decreased from 1,385 to 1,304. Employment in leisure and hospitality increased from 1.148 million, with restaurant and hotel employment increasing to 1.004 million from 976,000.

The accommodation and food service sector has the highest quit rate, but this fell in June to 5.7 per cent from 5.9 per cent. In February, the dropout rate reached 6.1%. Quits are interpreted as a sign of worker confidence and strength in the labor market, as workers typically leave their jobs voluntarily when they expect to easily find a new position.

Construction jobs fell from 405,000 to 334,000, a 17% decline. On Monday, the government reported that construction spending fell 1.1 percent in June. Spending on single-family home construction — a sector particularly sensitive to interest rate increases — fell 3.1 percent. Construction hiring fell to 346,000 from 359,000. Departures fell from 230,000, or 3.0 percent, to 179,000, a 2.3 percent rate. Exposures to real estate fell to 132,000 from 154,000.

Openings rose somewhat in finance and insurance, education, healthcare and information technology.

Federal government openings fell from 121,000 to 85,000. State and local openings fell from 907,000 to 847,000 as postings for school positions fell from 362,000 to 300,000. School enrollment rose to 200,000 from 188,000 a month earlier.

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