February's JOLTS report suggests US labour market is softening

(Alliance News) - The number of job openings in the US fell more than expected in February, according to the latest data from the US Bureau of Labor Statistics.

For Matthew Martin, US economist at Oxford Economics, February's JOLTS report is an indication that the softening in the US labour market "may be gaining some momentum".

On the last business day of February, the number of job openings fell 632,000 to 9.9 million, from 10.6 million in January.

Markets had expected the number of job opening to dip to 10.4 million in February, according to FXStreet.

The Oxford Economics analyst noted that while the number of job openings remain "highly elevated", February's level was the first month below 10 million since May 2021. This, he said, suggests businesses are becoming "more wary about additional headcount".

In February 2022, the number of job openings stood at 11.6 million.

Andrew Hunter, deputy chief US economist at Capital Economics, said that the sharp fall in job openings suggest that labour demand was cooling "even before the recent banking turmoil".

"The vacancy-to-unemployment ratio, which the Fed has often cited as a measure of excess labour demand, fell to its lowest level since late-2021 and points to slower wage growth," he said.

"In a further sign that a soft landing is still possible, the fall in job openings has so far mostly reflected slower hiring, with the job layoff rate still unusually low, possibly reflecting some labour hoarding."

Hunter argued that this provided "another reason" to think that the US Federal Reserve's tightening cycle is "nearly over."

In March the Fed lifted US interest rates by 25 basis points, taking the federal funds rate range to 4.75% to 5.00%.

It was an outcome that was largely expected, though tumultuous developments in the global banking sector meant the Fed may have been tempted to decide against a rate hike.

The central bank said at the time that "some additional policy firming may be appropriate". However, the market interpreted that as more dovish than the Fed's previous guidance, where it said "the committee anticipates that ongoing increases in the target range will be appropriate".

Oxford Economics' Matthew Martin said the US central banking officials will put much more stock in Friday's employment report - the nonfarm payroll figures for March, released at 1230 GMT.

"The Fed is on track to raise rates by a further 25 basis points at the May and June meetings and will need to see much more progress to determine its goals have been achieved," Martin concluded.

By Heather Rydings, Alliance News senior economics reporter

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