Job Vacancies Rise in January Amid Stable Demand for Workers
In January, the job vacancy rate in the United States increased to meet the stable demand for labor, even as federal layoffs related to the Department of Efficiency (DOGE) are expected to take effect in the coming months.
According to data released by the Bureau of Labor Statistics on Tuesday, available positions climbed from a revised 7.51 million in December to 7.74 million. This figure surpassed the median estimate of 7.6 million from economists, indicating the resilience of the U.S. labor market.
The report is part of the Labor Department’s monthly Job Openings and Labor Turnover Survey (JOLTS), also showing a slight decline in layoffs while the number of Americans voluntarily resigning increased.
Federal Workforce Cuts Have Yet to Impact the Job Market
Job vacancies across multiple sectors, including real estate, healthcare, manufacturing, and construction, remain robust. However, federal job openings decreased from 138,000 in December to 135,000, potentially due to the effects of layoffs ordered by President Donald Trump at the behest of billionaire Elon Musk.
The agency was established under President Donald Trump with the focus on reducing federal employment. However, its impact on labor data was not fully “felt” in January’s job market report. Some analysts expect that layoffs will be more pronounced in February’s data, which is scheduled for release on April 1.
“These January data only include the earliest federal worker layoffs,” commented Carol Weinberg and Mary Chen of High Frequency Economics. “There is no evidence of federal government layoffs in this report. This does not mean that large-scale layoffs won’t be a major feature of the February report.”
Employment Market Remains Stable, but Concerns Over Layoffs Persist
According to labor data, the trend in job vacancies has declined over the past three years, but vacancies remain above pre-pandemic average levels. The hiring rate in January remained unchanged, while the layoff rate decreased to 1%, the lowest since June, possibly indicating limited employment opportunities in the U.S. economy.
The so-called “quit rate,” or voluntary resignations, climbed to 2.1%, the highest level since July, representing a slow yet steady decline since 2022.
Nevertheless, recent updates indicate signs of labor market strain, with unemployment claims rising to near three-year highs in late February, and the latest employment report showing an increased unemployment rate of 4.1%.
The ratio of job vacancies to unemployed workers, which the Federal Reserve uses to inform its interest rate decisions, remained stable at 1.1. While still above pre-pandemic levels, this ratio has fallen from a peak of 2 to 1 in 2022, indicating a decrease in job demand over the past three years.
Federal Reserve Maintains a Cautious Stance
The latest employment market data may not convince the Federal Reserve to lower its benchmark interest rate at the policy meeting scheduled for March 19. The rate is currently set between 4.25% and 4.50%, unchanged since January.
Market expectations for a rate cut at the next Federal Open Market Committee (FOMC) meeting are low, with the CME FedWatch tool indicating only a 3% probability.
At a news conference on March 7, Federal Reserve Chair Jerome Powell stated in Chicago that despite overall inflation rates having declined, recent readings on inflation still exceed the Fed’s target of 2%.
“Many indicators suggest that the labor market is solid and is largely balanced. If inflation is not at the FOMC’s target level and the labor market remains strong, the FOMC may be reluctant to lower interest rates,” Powell said.
Since September 2024, the central bank has cut its policy rate by 100 basis points following the tightening cycle extended in 2022 and 2023, raising rates by 5.25 percentage points to address inflation risks.
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