Hot Employment Market Shows Signs of Cooling

Job openings fell to their lowest level in nearly two years.

A hiring sign displayed at a restaurant in Prospect Heights, Ill., April 4, 2023.
A hiring sign displayed at a restaurant in Prospect Heights, Ill., April 4, 2023.
AP Photo/Nam Y. Huh, File

NEW YORK (AP) — The hot jobs market has been defying a weakening economy and confounding the Federal Reserve for months, but now shows signs of cooling.

The latest set of employment data from the government shows that job openings fell in March to their lowest level since April 2021. Layoffs rose to 1.8 million, their highest level since December 2020.

Employers are also slowing the pace of hiring. While hiring remained strong in April, the government lowered its hiring figures for February and March. More broadly, job gains for February through April marked the weakest three-month average since January 2021.

The persistently strong labor market has bewildered the Fed and economists for more than a year as higher interest rates meant to slow economic growth did little to loosen a historically tight job market with record low unemployment. That resistance is now slowly fading, according to analysts.

"The labor market is usually the last to break in an economic downturn, and when it does, things can change quite rapidly," said David Kelly, chief global strategist at JPMorgan Funds, in a note.

Factors including tighter business conditions, weak sentiment and declining job openings will likely keep factoring into future labor data.

"The labor market can't dodge a downturn indefinitely," Kelly said.

The strong job market and higher wages for workers have resisted the Fed's efforts to cool inflation, while also keeping a weakening economy from slipping into a recession. The Fed has raised rates 10 times since March 2022, but recently signaled that it may forego a rate hike at its next meeting in June.

Wall Street expects the central bank to hold its current benchmark interest rates steady at a range of 5% to 5.25% at its next meeting in June.

The Fed's goal when it began raising interest rates in 2022 was to achieve a so-called soft landing, where it would slow economic growth enough to tame inflation while avoiding a recession. Earlier this month Fed Chair Jerome Powell said such an outcome could be achieved, pointing out that the unemployment rate has actually declined slightly since the Fed started hiking rates, even as inflation declined. If such a pattern held, a downturn could be avoided, Powell said.

However most economists expect the U.S. to slip into a recession this year, but estimates of its potential severity differ.

Wall Street is closely watching how companies react to the economic slowdown. Analysts expect many of the layoffs announced over the past few months by companies like Google and Facebook to have a lag effect on broader employment data this year.

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