The number of job openings fell by more than 1 million to just over 10 million in August, signaling that employers are preparing for leaner times, the Labor Department reported on Tuesday.
The 10.1 million openings compares to 11.3 million in July but is still a high number historically. However, while hiring remains stable the lower number of potential hires suggests companies are paring back on their future employment plans.
The largest decreases came in health care and social assistance, down 236,000; other services, dropping by 183,000 and retail, falling by 143,000.
The monthly report is one of many out this week on the health of the labor market, culminating in the monthly jobs number released on Friday. Economists expect that number to come in around 250,000, although it has surprised to the upside in recent months. Private payroll firm ADP will also release its monthly jobs survey on Wednesday.
While other parts of the economy have begun to show the effects of higher interest rates, notably housing where home sales are off by nearly 25% from a year ago, the job market has remained resilient so far. This comes even as many economists predict the U.S. economy is headed for a recession sometime in the next year.
To determine the risk of a downturn, Wells Fargo economic researchers looked at the historical differences in yields for short and long duration bonds to determine whether an inverted yield curve, where investors are getting more yield for shorter term bonds than longer ones, is a reliable indicator of a looming recession.
Normally, investors are paid more for taking on longer-term debt, as that is presumed to be riskier given the unpredictability of the economy over time. When the opposite happens, it means investors are more doubtful of the economy’s short-term prospects.
The bank looked at many different bond yields, but focused on the relationship between the 10-year and 1-year Treasuries.
“Recently, our preferred 10-year/1-year yield spread breached the recession-prediction threshold in August and remained negative through September, suggesting there is a 91% chance of a recession during the next 12 months,” it concluded.
Dan North, senior economist at Allianz Trade North America, says that Friday’s jobs number could well be a good one, but there are still signs the labor market may be weakening.
“So although we may continue to see some strong job gains for a few months to come, the party will be over soon,” North says in an email. “That’s because the Fed has jacked up rates so far so fast, and is going to continue doing so, that it will send the economy into recession by the end of this year or early next year.”
And Monster, the online job search site, is noticing a pickup in searches for part-time work, often an indicator that workers may be looking for extra work to make ends meet.
“We’re seeing workers who already have jobs are needing to seek additional income, beyond their base salary to manage the economic impact,” says Monster Economist Giacomo Santangelo in an email. “This may mean taking on more work at their current job, working a second job, or seeking part-time or gig work to help meet financial obligations.”
“We expect this trend to endure as the Federal Reserve continues to raise interest rates, driving up unemployment and leaving many workers in need of other sources of income,” he added.