Job Openings Shrink by 1.1 Million—the Most in 2.5 Years

Average hourly earnings rose 5.2%, but accounting for inflation, employee pay fell 2.8%.

October 06, 2022

ALEXANDRIA, Va.—Job openings in August were down by 1.1 million compared with July, falling by the most in nearly 2 ½ years, reports Reuters. There were 10.1 million job openings in August, the lowest level since mid-2021; however, job vacancies remained above 10 million for the 14th straight month.

There were 1.7 job openings for every unemployed person in August, which was down from two per person in July. Reuters reports this is a closely watched measure of supply-demand balance. August’s numbers showed the labor market remained above its historical average. Layoffs also stayed low, signs of a still-tight labor market, which likely will keep the Federal Reserve on its aggressive monetary policy tightening path, according to Reuters.

"Even as higher interest rates and inflation and weaker business and consumer confidence are beginning to tamp down labor market activity, the labor market still remains healthy," Sophia Koropeckyj, a senior economist at Moody's Analytics in West Chester, Pennsylvania, told Reuters. "We expect that the Fed is not yet ready to pause."

August's decline was the largest since April 2020. The health-care and social assistance industry had the most job opening decreases with a decline of 236,000. There were 183,000 fewer job openings in other services, while vacancies decreased by 143,000 in the retail trade industry.

"The drop in openings could reflect health-care providers becoming more accustomed to operating under labor shortages and forgoing hiring," Veronica Clark, an economist at Citigroup in New York, told Reuters.

CNBC reports that the job market has been a primary driver of inflation because there has been a large demand on a small labor pool, which has causes wages to increase wages sharply. Average hourly earnings rose 5.2% over the 12-month period through August. But adjusted for inflation, real earnings actually declined 2.8%.

“Job openings took a major dive in August, falling by more than about 1 million, but they still total more than 10 million. That and other data point to a jobs market that’s still challenging for employers,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNBC. “But judging by the drop in openings and the high number of Americans who entered the labor force in August, almost 900,000, the worst of the tight labor market is over.”

The Federal Reserve is attempting to align the labor supply with demand, and the Fed uses rate increases to slow the flow of money through the economy. The labor market hasn’t reacted much to the moves, with weekly jobless claims recently hitting a five-month low and the unemployment rate at 3.7%, according to CNBC.

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In “Understanding Your Local Labor Landscape,” NACS Magazine offers some tips for building an effective employee value proposition.