Job openings fell more than expected in July. The data comes as investors closely watch for signs of further cooling in the labor market amid speculation the Federal Reserve will cut interest rates this month.

New data from the Bureau of Labor Statistics released Wednesday showed there were 7.67 million jobs open at the end of July, a decrease from the 7.91 million seen in June. This marked the lowest number of job openings since January 2021.

June's figure was revised lower from the 8.18 million open jobs initially reported. Economists surveyed by Bloomberg had expected the report to show 8.1 million openings in June.

The Job Openings and Labor Turnover Survey (JOLTS) also showed 5.5 million hires were made during the month, a slight uptick from June. The hiring rate increased to 3.5% in July, up from 3.3% in June. Also in Wednesday's report, the quits rate, a sign of confidence among workers, rose to 2.1%, up from 2% in June.

Oxford Economics senior US economist Nancy Vanden Houten wrote in a note to clients the latest data is a sign "that demand for labor continues to ease."

The JOLTS report comes as a slowdown in the labor market has moved into focus. In a speech in late August, Federal Reserve Chair Jerome Powell said the cooling in the labor market has been "unmistakeable." Powell added the downside risks to the central bank's mandate for full employment have risen.

"It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon," Powell said. "We do not seek or welcome further cooling in labor market conditions."

This has pushed economists to argue that further signs of labor market deterioration would likely prompt the central bank to cut interest rates more aggressively.

"We think that the bar would be relatively high to move the [Fed] consensus to a 50 bp rate cut in September — and require fairly ominous warnings on the labor market front," UBS chief US economist Jonathan Pingle wrote in a note on Tuesday.

Read more: How does the labor market affect inflation?

Further signs of labor market cooling could be found in the details of the latest JOLTS report. The ratio of unemployed workers to job openings fell to 1.07 in July, below the average seen in 2019 before the pandemic disrupted the labor market, and about in line with data from April 2018.

Renaissance Macro's head of economic research Neil Dutta wrote on X that the decline in the ratio is "yet another sign that labor demand has cooled, going a bit beyond where we were just before the pandemic."

After Wednesday's data, markets moved to price in a nearly 50% chance the Federal Reserve slashes interest rates by 50 basis points by the end of its September meeting, up from a 38% chance the day prior, per the CME FedWatch Tool.

A more comprehensive look at the labor market will come on Friday with the August jobs report, and economists expect the report to show that the July report may have overstated weakness in the labor market.

Consensus expectations among economists surveyed by Bloomberg project the US economy added 165,000 jobs in August while the unemployment rate ticked down to 4.2%. This would mark the first decrease in the unemployment rate since March.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

Click here for in-depth analysis of the latest stock market news and events moving stock prices

Read the latest financial and business news from Yahoo Finance