US job openings drop by 1 million in a month. Could it help reduce inflation?

The number of job openings in the United States dropped by more than one million in August, signaling that the historically hot labor market is slowly coming off the boil. The fact that hires and separations (quits, layoffs and other separations) were relatively stable at 6.3 and 6.0 million, respectively, suggests that labor demand may indeed be cooling as some employers apparently withdrew job postings rather than filling them. At the same time, the number of unemployed persons increased by 344,000 in August after having fallen below the February 2020 (i.e. pre-Covid) level in July.

While these figures point towards a cooling of the labor market, which could in turn relieve upward pressure on wages and thus help ease inflation, it’s important to note that labor demand remains historically high. According to the latest JOLTS report, job openings fell to 10.1 million in August, meaning that there are still more than 1.5 unfilled positions for every unemployed person in the U.S. One factor that could help further ease the worker shortage is people coming off the sidelines and (re-)joining the workforce. In August, more than three quarters of a million people joined the labor force, bringing it to a post-pandemic high of 164.7 million.