The number of job openings in the U.S. in February fell below 10 million for the first time in about two years, signaling a slowdown in the labor market.
According to the February Job Openings and Labor Turnover Survey (JOLTs) released by the U.S. Department of Labor on the 4th (local time), the number of job openings by companies in February was 9.931 million, down about 630,000 from the previous month. This is the first time in nearly two years since May 2021 that the monthly job openings have dropped below 10 million. It also fell short of the expert forecast of 10.4 million compiled by FactSet.
By industry, job openings sharply declined in the professional and business services, healthcare and social assistance, and transportation and utilities sectors. On the other hand, openings increased in construction and the arts, entertainment, and leisure sectors.
Daniel Zhao, Chief Economist at Glassdoor, analyzed, "This will definitely be the biggest news today," adding, "It reflects the continued cooling of the labor market." This is a sign that the overheated U.S. labor market is slowing down due to the tightening effects of the Federal Reserve (Fed) that have continued since last year. The January job openings were also revised downward from 10.824 million to 10.563 million.
The ratio of job openings per unemployed person fell from 1.9 in January to 1.7 in February. This is also the lowest since October 2021. However, it still remains above the pre-pandemic level of 1.2.
Following the report's release, the possibility that the Federal Reserve (Fed) will hold the benchmark interest rate steady at the May FOMC meeting has slightly increased. Coupled with weak manufacturing indicators, this has further spread fears of an economic recession in the market. According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of today, the federal funds futures market reflects a 57% chance of a rate hold in May, up from the 42% range the previous day. Conversely, the probability of a 0.25 percentage point rate hike by the Fed dropped from the 57% range the previous day to 43%.
Earlier, the sharp rise in international oil prices due to additional production cuts by oil-producing countries led to assessments that the Fed's rate decision calculus has become more complicated. The surge in oil prices could fuel global inflation, potentially triggering a hawkish rate hike stance among central banks worldwide. On the other hand, since the Fed primarily monitors core inflation, which excludes volatile oil and food prices, there is also a view that a more cautious approach is warranted. Amid this, the confirmation of labor market slowdown signals and the reemergence of recession concerns have added weight to the likelihood of a rate hold.
According to GDP Now, the Atlanta Federal Reserve Bank’s GDP estimation model, the growth forecast for the first quarter of this year was sharply revised down from 3.5% two weeks ago to about 1.7% annualized. Julien Emmanuel, Managing Director at Evercore ISI, stated, "We are currently only feeling the initial effects of tightening," and added, "Although the recession will be mild, it will occur, and the stock market will be the hardest hit."
The March employment report will be released on the 7th. Wall Street estimates that nonfarm payrolls for March will be around 240,000, reflecting a further decline from 311,000 in the previous month. The unemployment rate is expected to remain unchanged at 3.6%.
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