WASHINGTON >> U.S. job openings dropped to a 3-1/2-year low in July, suggesting the labor market was losing steam, but the reduction on its own is probably not enough for the Federal Reserve to consider a big interest rate cut this month.

The Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department today also showed layoffs rising to a near 1-1/2-year high. There were 1.07 open positions for every unemployed person in July, the lowest since May 2021 and down from 1.16 in June.

The vacancies-to-unemployed ratio peaked just above 2.0 in 2022 and averaged 1.19 in 2019 before the COVID-19 pandemic. The labor market is being closely watched by investors and Fed officials following four straight monthly increases in the unemployment rate, which stoked fears of a recession and put a half-percentage point rate cut on the table this month.

“The labor market is still in pretty good shape, but it has cooled dramatically over the last year and a half,” said Bill Adams, chief economist at Comerica Bank. “Most Americans who want jobs have them, but there are fewer opportunities or alternatives for workers who are laid off or simply prefer something different.”

Job openings, a measure of labor demand, had fallen by 237,000 to 7.673 million on the last day of July, the lowest level since January 2021, the Labor Department’s Bureau of Labor Statistics said. Data for June was revised lower to show 7.910 million unfilled positions instead of the previously reported 8.184 million.

Economists polled by Reuters had forecast 8.100 million job openings. Vacancies peaked at 12.182 million in March 2022 and are down by 1.1 million over the year.

Unfilled jobs declined by 187,000 in healthcare and social assistance and decreased by 101,000 in state and local government, excluding education. These two are among a handful of sectors that have driven job growth this year.

Transportation, warehousing and utilities had 88,000 fewer open positions. But job openings increased by 178,000 in professional and business services and there were 28,000 vacancies in federal government.

The job openings rate fell to 4.6% from 4.8% in June.

Hires increased by 273,000 to 5.521 million. The hires rose by 156,000 in accommodation and food services, but decreased by 8,000 in the federal government. The hires rate rose to 3.5% from 3.3% in June.

Layoffs rose 202,000 to 1.762 million, the highest level since March 2023. Layoffs, however, remain low by historic standards. The rise in July was led by a 75,000 increase in accommodation and food services as well as a 21,000 advance in finance and insurance.

The layoffs rate rose to 1.1% from 1.0% in June. The labor market is slowing in an orderly manner, which would reduce the need for the Fed to deliver a half-percentage-point interest rate cut at the U.S. central bank’s Sept. 17-18 policy meeting.

“Does this report suggest the need for a 50-basis-point rate cut in September?” asked Conrad DeQuadros, senior economic advisor at Brean Capital. “We would say no because … the vacancies-to-unemployed ratio is still high by historical standards.”

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

TRADE DEFICIT WIDENS

A 50-basis-point rate reduction was also put in doubt by strong consumer spending in July. A rise in the unemployment rate to near a three-year high of 4.3% in July rattled financial markets and ignited fears of a recession.

That was compounded by the government estimating last month that employment gains were overstated by 68,000 jobs per month in the 12 months through March.

But economists cautioned against viewing these developments as signs that the labor market was in trouble, arguing that a surge in immigrants had boosted the unemployment rate. They also noted that the data from which the government based its so-called payrolls benchmark revision estimate does not include undocumented immigrants, a group that they believe contributed to strong job growth last year.

A separate report from the Commerce Department’s Bureau of Economic Analysis today showed the trade deficit increased 7.9% to $78.8 billion, the widest since June 2022 as businesses likely front-loaded imports in anticipation of higher tariffs on goods, suggesting trade could remain a drag on economic growth in the third quarter.

Economists had forecast the trade deficit would increase to $79.0 billion. Imports increased 2.1% to $345.4 billion. Goods imports rose 2.3% to $278.2 billion, the highest since June 2022. They were boosted by an increase in capital goods, which increased $3.3 billion to a record high, mostly reflecting computer accessories.

While the surge in imports would subtract from gross domestic product, it was an indication of strong domestic demand and inconsistent with financial market fears of a recession.

“Net trade will weigh on third-quarter GDP growth, but that is hardly cause for concern when it reflects the continued strength of imports, painting a better picture of domestic demand than renewed recession fears would suggest,” said Thomas Ryan, North America economist at Capital Economics.

President Joe Biden’s administration has announced plans to impose steeper tariffs on imports of Chinese electric vehicles, batteries, solar products and other goods.

The government said last week a final determination will be made public in the “coming days.” There are also fears of even higher tariffs on Chinese imports should former President Donald Trump return to the White House after the Nov. 5 election.

The politically sensitive goods trade deficit with China increased $4.9 billion to $27.2 billion.

Exports gained 0.5% to $266.6 billion. Goods exports climbed 0.4% to $175.1 billion. The goods trade deficit increased 6.9% to $97.6 billion after adjusting for inflation.

Trade has been subtracted from GDP for two straight quarters. Most of the imports are, however, likely to end up as inventory amid slowing domestic demand, which could blunt some of the impact on GDP. Growth estimates for the third quarter are currently as high as a 2.7% annualized rate. The economy grew at a 3.0% pace in the April-June quarter.