Job Openings Plunge to a 2-Year Low
MyEListings' markets and economics editor and creates content about global macro events and their impact on US commercial real estate.
In a surprising turn of events, the United States has witnessed a notable dip in its job openings, plummeting by 338,000 in July to a meager 8.827 million, which is a staggering two-year low since March 2021, as divulged by the Labor Department's recent report.
This downturn has caught economists off-guard as most projections hinted at a minor decline to just 9.1 million job openings.
What's Causing the Dip?
The present reduction in job opportunities signals a recalibration of the labor market, potentially ushered by several determinants:
- Federal Reserve's Strategic Stance: The Federal Reserve's choice to hike interest rates, aimed at countering inflation, seems to be a pivotal cause. This campaign is elevating borrowing costs for businesses and property owners, inducing a delayed deceleration in recruitment drives.
- Persistent Growth Impulse: The persisting propensity to grow even as the Federal Reserve has hiked interest rates from 0.5% to 5.5% in just 17 months belies an economy beset with inherent advantages over rival economies.
As indications appear that suggest the Federal Reserve might be close to successfully executing a ‘soft landing,' risks could actually increase as the potential cost of further policy shifts swells.
Consequences for the Workforce
This contraction in job vacancies presents a dichotomy of implications for job seekers:
- Potential Wage Stagnation: The adverse facet suggests a probable stagnation or even a regression in wage growth increments in the foreseeable future.
- Reduced Competition: On a more positive note, job seekers might find it slightly less competitive to land positions due to decreased contenders vying for the same roles.
Labor markets tend to be lagging indicators of economic activity, thus the potential for recession seems to be increasing in the context of indicator confirmations.
A deeper dive into the report's insights reveals the following:
- Sectoral Hits: The leisure and hospitality industry took the hardest blow, losing a whopping 153,000 job openings. Professional and business services weren't spared either, with a deficit of 52,000 opportunities.
- A Silver Lining: Contrarily, the construction domain demonstrated resilience, contributing an additional 50,000 roles, marking it and manufacturing as the report's bright spots, despite year-over-year declines.
- Declining Overall Unemployment Figures: Despite the persistent job openings in construction and manufacturing, overall job openings declined by a not-insignificant 3.7% month-over-month, from June to July.
The prevailing scenario suggests the labor market is gravitating toward an elusive equilibrium as it digests economic cross currents and mass Boomer retirements.
Key Takeaways from the Labor Market
Demographic imbalances in Europe and Asia at present lend the US economy something of a relative backstop as it occupies the sweet spot where the highest value skill sets can still be found at scale.
Moving forward, this dichotomy should accelerate as these societies and economies age much more quickly and their lack of younger workers begins to exert influence. The counter-balance for the US could present itself in the form of a more quickly declining office property market.
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