The number of job vacancies fell to its lowest level in two and a half years in October, a sign that the historically tight labor market may be easing.

The number of job openings this month was seasonally adjusted at 8.73 million, a decline of 617,000, or 6.6%, the Labor Department reported Tuesday. The number was well below the Dow Jones estimate of 9.4 million and the lowest level since March 2021.

The drop in job vacancies brought the ratio of job vacancies to available workers down to 1.3 to 1, a figure that was around 2 to 1 just a few months ago and close to the pre-pandemic level of 1.2 to 1 .

Federal Reserve policymakers are closely watching the report, known as the Job Openings and Labor Turnover Survey, for signs of a workforce disruption. The Fed has sharply raised interest rates since March 2022 to slow the labor market and cool inflation and is considering its next policy move.

While the number of job openings fell dramatically, the total number of new hires fell only slightly, while the number of layoffs and separations increased slightly.

There has also been little change in layoffs, which are seen as a measure of workers’ confidence in their ability to change jobs and easily find another. The quit rate peaked at around 3% of total employment in late 2021 to early 2022, during the period briefly dubbed the “Great Resignation,” as workers left their old jobs in search of positions that paid better and better working conditions offered; it has since fallen to 2.3%.

“This data certainly supports the Fed’s decision to keep interest rates unchanged while watching for signs of a turnaround at the upcoming meeting next week,” said Tuan Nguyen, U.S. economist at RSM. “Along with inflation, job vacancy data, which serves as an indicator of labor demand and wage pressures, has been the Fed’s top priority recently.”

Declines in job openings were widespread across the industry.

The largest decline in the sector was education and healthcare (-238,000), followed by financial activities (-217,000), leisure and hospitality (-136,000) and retail (-102,000).

The JOLTS report comes just days before the Labor Department’s November nonfarm payroll count. Economists expect a rise of 190,000, up from October’s 150,000, according to Dow Jones.

Fed officials have targeted the red-hot labor market as a particular concern in their fight to bring inflation down from its four-decade high last year. A decline in job vacancies is likely to be welcome news for policymakers, as it could mean that lower demand for workers could help bring the labor market back into balance after a major mismatch with supply.

The Fed holds its two-day policy meeting next week, with markets largely expecting the Federal Open Market Committee to leave interest rates unchanged. Traders in the Fed funds futures market are pricing in interest rate cuts starting in March as they expect inflation data to continue showing progress and the central bank tries to stave off a possible slowdown or recession.

In other business news on Tuesday, the ISM Services Index for November recorded a reading of 52.7%, representing the share of companies reporting expansion versus contraction. The value was almost a full percentage point higher than in October and slightly above the Dow Jones forecast of 52.4%.

In the survey, increases resulted from inventory sentiment, inventories and new export orders. Employment rose to 50.7% while prices fell slightly to 58.3%. A value above 50% means growth.

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