US job openings fall to lowest level in almost two years

US job openings dropped sharply in February, in a sign that the red-hot labour market continues to cool as the Federal Reserve raises interest rates.

There were 9.9mn vacancies in February, down from 10.5mn in January, according to the US Department of Labor’s Job Openings and Labor Turnover Survey released on Tuesday. It was the first time job openings have fallen below 10mn since May 2021. Economists polled by Reuters had forecast 10.4mn openings.

“As job openings stayed relatively high over the past few months, doubts were emerging that perhaps demand for workers wasn’t moderating as expected in the face of broader efforts to cool the overall economy,” said Nick Bunker, an economist at jobs site Indeed. “But today’s data offers some needed clarity — the US labour market is definitively cooling off.

“At this rate, we’d return to a pre-pandemic level of openings by this summer.”

The Fed has quickly raised interest rates in an attempt to tame inflation, as businesses are forced to raise wages in a competitive labour market and often pass those costs on to customers. But the jobs market had proven resistant to the Fed’s efforts. Employers added 311,000 jobs in February, more than economists expected, even as wage growth slowed.

The drop in job openings, which are widely considered to be a proxy for labour demand, was led by the sectors that added the most jobs during the coronavirus pandemic recovery. Employers in professional services, healthcare, transportation and utilities, and food services each cut more than 120,000 openings in February.

The ratio of open jobs to unemployed people, one of the data points most closely tracked by Fed officials, fell to 1.7 from 1.9.

Still, workers seem to have sustained confidence in the labour market. The number of workers who quit their jobs voluntarily rose by 146,000 to 4mn in February, indicating that a substantial number of workers are still able to find new roles.

Lay-offs fell by 215,000 to 1.5mn, with an aggregate rate still below pre-pandemic levels, despite reports of mass job cuts at prominent tech companies including Meta and Amazon. Economists had feared that the Fed’s rate increases could lead to a jump in job reductions.

The labour department will give a more up to date picture of the jobs market when it releases its monthly payrolls report on Friday. Economists surveyed by Bloomberg forecast that employers added 240,000 jobs in March.