U.S. job openings increased in January, but demand for labor is likely to soften in the months ahead amid concerns that uncertainty over import tariffs and aggressive government spending cuts could cause a sharp slowdown in economic activity.

For now, the labor market is holding steady, with the Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday showing layoffs declining for a fourth straight month to the lowest level since last June.

There were 1.13 job openings for every unemployed person, up from 1.09 in December. Hiring, however, remained tepid consistent with caution among businesses. President Donald Trump's whiplash trade policy, marked by on-again and off-again tariffs against Canada and Mexico, has shaken business and consumer confidence.

Investors have dumped stocks, wiping out all the gains notched in the aftermath of Trump's November 5 election victory, as the risks of a recession have increased from the trade tensions.

"This report tells us that the labor market was healthy from the perspective of continued expansion prior to the policy regime shift that began to unfold with the new administration," said Conrad DeQuadros, senior economic advisor at Brean Capital.

"Unfortunately, the report tells us nothing about how companies will respond to the threat of tariffs and rising uncertainty, and this could take several months to unfold."
Job openings, a measure of labor demand, were up 232,000 to 7.740 million by the last day of January, the Labor Department's Bureau of Labor Statistics said. Data for December was revised lower to show 7.508 million vacancies instead of the previously reported 7.600 million.
Economists polled by Reuters had forecast 7.63 million unfilled positions. That reading is down 728,000 over the year. Annual revisions showed fewer open jobs from January last year through December than had been estimated.

The annual average job openings level decreased by 1.5 million to 7.8 million in 2024.

The increase in vacancies in January was led by retail trade, with 143,000 additional openings. There were 122,000 more unfilled positions in the financial activities sector and an additional 58,000 vacancies in the healthcare and social assistance industry.

But job openings declined by 122,000 in the professional and business services sector. Unfilled jobs in the leisure and hospitality industry declined by 46,000. Federal government job openings decreased by 3,000, likely reflecting a hiring freeze by the Trump administration

The job openings rate rose to 4.6% from 4.5% in December.

Trump, who has doubled duties on Chinese goods to 20% and raised levies on steel and aluminum imports as well as threatened reciprocal tariffs, on Sunday declined to comment when asked whether the economy could experience a downturn. Trump on Tuesday doubled his planned tariff on all steel and aluminum products from Canada to 50%.
Tech billionaire Elon Musk's Department of Government Efficiency, or DOGE, has fired thousands of employees in an unprecedented campaign to shrink the federal government and slash spending. Economists have warned that the mass layoffs and spending cuts, which have also impacted federal contractors, would spill over to the private sector.

Those concerns were evident in the National Federation of Independent Business survey, with the Small Business Optimism Index dropping 2.1 points to 100.7 in February.
"Even Republican-leaning small business owners are rattled by the tariff and spending cut plans of the new administration," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

U.S. stocks were trading mostly lower. The dollar eased against a basket of currencies. U.S. Treasury yields rose.

The stable labor market should allow the Federal Reserve to keep its benchmark overnight interest rate unchanged in the 4.25%-4.50% range next week. Financial markets expect the U.S. central bank to resume cutting rates in June because of the deteriorating economic outlook, after pausing in January.

The policy rate has been reduced by 100 basis points since September when the Fed started its easing cycle. The central bank hiked the policy rate by 5.25 percentage points in 2022 and 2023 to tame inflation.

While job growth was solid in February, there were plenty of red flags for the labor market. A broader measure of unemployment surged to near a 3-1/2-year high as the ranks of part-time workers swelled. The share of workers holding multiple jobs was the highest since the Great Recession.
Layoffs dropped 34,000 to a seven-month low of 1.635 million in January, the JOLTS report showed. Job cuts fell in the retail, leisure and hospitality as well as the financial activities sector. They slipped by 1,000 in the federal government.

The layoffs rate eased to 1.0%, the lowest level since June, after holding at 1.1% for three straight months.

Source: Investing.com