WASHINGTON (Reuters) - The share of unemployed Americans competing for each open job fell to a near eight-year low in June, pointing to a labor market tightening that could boost wage growth and bolster the case for an interest rate increase this year.
The Labor Department’s monthly Job Openings and Labor Turnover Survey, released on Wednesday, showed the number of unemployed job seekers per open job fell to 1.58, the lowest since August 2007. The ratio was at 1.62 in May.
“We view this metric as an indicator of labor market slack and see its continued downward trend as supportive of our optimistic outlook for U.S. labor markets,” said Jesse Hurwitz, an economist at Barclays in New York.
The so-called JOLTS report is one of the indicators being closely watched by Federal Reserve Chair Janet Yellen and other U.S. central bank policymakers as they contemplate raising interest rates for the first time in nearly a decade.
Many economists expect the Fed will hike borrowing costs next month against the backdrop of a steadily growing economy and a tightening labor market. Financial markets have, however, slightly shifted their rate hike expectations towards December following China’s devaluation of the yuan this week.
At 5.3 percent, the unemployment rate is near the 5.0 percent to 5.2 percent range most officials think is consistent with a steady but low level of inflation.
While job openings, a measure of labor demand, slipped to a seasonally adjusted 5.23 million in June from an all-time high of 5.36 million in May, they remained at lofty levels. Hiring rose to its highest point since December.
“Labor demand should hold up over the next several quarters, in turn supporting solid household income growth and further consumption gains,” said Hurwitz.
The quit rate, which the Fed looks at as a measure of confidence in the jobs market, held at 1.9 percent for a third straight month. It has bounced between 1.9 percent and 2.0 percent since September 2014. “Trends in hires and quits rates will likely be viewed positively at the Fed,” John Ryding, chief economist at RDQ Economics in New York.
The JOLTS report showed a modest rise in the pace of layoffs in June, with the layoffs and discharges rate rising to 1.3
percent from 1.2 percent in May. Layoffs and discharges increased in the Midwest and West.
“The number of layoffs has generally been trending sideways over the past few years at a fairly low level despite the choppiness in the monthly figures,” said Daniel Silver, an economist at JPMorgan in New York.
Reporting By Lucia Mutikani; Editing by Frances Kerry