By Lucia Mutikani
WASHINGTON, May 5 (Reuters) – U.S. job openings slipped in March amid a decline in professional and business services, but a surge in hiring to a more than two-year high suggested the labor market was regaining its footing after struggling in recent months.
The largest increase in hires since the spring of 2020 followed a plunge in February. Economists said the U.S.-Israeli war with Iran posed a downside risk to the labor market. Still, the report from the Labor Department on Tuesday reinforced their expectations that the Federal Reserve would leave interest rates unchanged into 2027. The job openings to unemployed ratio was at 0.95 in March.
“Today’s reading will be a reassuring sign for the FOMC (Federal Open Market Committee) that labor demand remained stable into the early stages of the Iran conflict, providing little cause for easing on risk management grounds,” said Marc Giannoni, chief U.S. economist at Barclays.
Job openings, a measure of labor demand, were down 56,000 to 6.866 million by the last day of March, the Labor Department’s Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey, or JOLTS report. Economists polled by Reuters had forecast 6.835 million unfilled jobs.
Vacancies decreased by 318,000 in professional and business services. There were more job openings in retail, financial activities, healthcare and social assistance sectors.
The job openings rate eased to 4.1% from 4.2% in February.
Hiring jumped by 655,000 to 5.554 million, the highest level since February 2024. The increase was the largest since May 2020. It spread across retail, transportation, warehousing and utilities, as well as professional and business services, and leisure and hospitality industries. The hires rate increased to 3.5%, the highest level since May 2024, from 3.1% in February.
The conflict with Iran has disrupted shipping through the Strait of Hormuz, raising the prices of commodities ranging from oil to fertilizers and aluminum.
Layoffs and discharges increased by 153,000 to 1.867 million, with the rate for that category climbing to 1.2% from 1.1% in the prior month. The professional and business services sector accounted for the bulk of the layoffs.
Economists expected the closely watched employment report for April to echo the stable labor market theme. The U.S. central bank last week left its benchmark overnight interest rate in the 3.50%-3.75% range, citing rising inflation concerns.
Stocks on Wall Street traded higher. The dollar was steady against a basket of currencies. U.S. Treasury yields dipped.
CRUDE OIL EXPORTS RISE IN MARCH
Inflation concerns were underscored by a separate report from the Institute for Supply Management, which showed a measure of prices paid for inputs by services businesses held near a 3-1/2-year high in April. Prices increased further for aluminum, beef, copper, diesel, gasoline, labor and lumber among others.
The war is, however, driving up exports of crude oil and other petroleum products, a third report from the Commerce Department’s Bureau of Economic Analysis and Census Bureau showed. Economists said the trend could help to narrow the trade deficit, which in March was partially boosted by imports of capital goods amid an artificial intelligence investment boom.
Exports increased 2.0% to an all-time high of $320.9 billion in March. Goods exports surged 3.1% to a record-high $213.5 billion. They were lifted by a $2.8 billion increase in crude oil shipments, mostly reflecting higher prices. Exports of other petroleum products increased $1.7 billion, while fuel oil shipments rose $1.6 billion.
There were also increases in exports of soybeans. Strong exports were more than offset by imports, which increased 2.3% to $381.2 billion. Goods imports rose 3.6% to $302.2 billion as capital goods jumped to a record high of $120.7 billion.
Businesses are rapidly investing in AI and data centers underpinning it, but most of the materials are imported. The trade deficit widened 4.4% to $60.3 billion. The goods trade deficit widened 4.8% to $88.7 billion. When adjusted for inflation, it increased 6.7% to $90.8 billion.
Trade subtracted 1.30 percentage points from gross domestic product growth in the first quarter. The economy grew at a 2.0% annualized rate last quarter.
The U.S. had goods trade deficits with several countries, including China, Taiwan, Vietnam, Mexico, Canada, India, South Korea, Saudi Arabia and Israel. Its shortfall with the European Union increased $4.1 billion to $9.2 billion in March.
President Donald Trump has imposed tariffs on trade partners, citing the trade deficits and a desire to bring manufacturing back to the United States.
“Trump 2.0 economic policies seeking to bring production back to American shores isn’t working yet as U.S. imports are very close to record levels,” said Christopher Rupkey, chief economist at FWDBONDS.
News on the housing market was slightly upbeat, but affordability remains a challenge as the war raises mortgage rates.
A fourth report from the Census Bureau showed sales of new single-family homes surged 7.4% to a seasonally adjusted annualized rate of 682,000 units in March as the drag from harsh weather faded. Sales increased to a rate of 635,000 units in February from 583,000 units in January, when they were weighed down by winter storms.
Builders have been offering incentives, including price reductions and mortgage rate buy-downs, to stimulate demand.
The average rate on the popular 30-year fixed-rate mortgage jumped from 5.98% in late February to 6.46% at the start of April, data from Freddie Mac showed.
“These incentives can keep the level of new homes sales supported this year, but we do not expect a meaningful and sustained increase with mortgage rates still elevated and consumer confidence remaining subdued,” said Veronica Clark, an economist at Citigroup.
(Reporting by Lucia Mutikani; Additional reporting by Dan Burns; Editing by Chizu Nomiyama and Andrea Ricci)
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