The latest data from the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) report reveals a concerning trend in the US labor market. Job openings have dropped to their lowest level in over 2-1/2 years, indicating a cooling demand for labor. This decline is believed to be a result of higher interest rates. The report also highlights a decrease in resignations, suggesting that workers are staying put in their current jobs, which could potentially ease wage inflation.
A Decline in Job Openings
In October, job openings fell by a staggering 617,000 to 8.733 million, the lowest level since March 2021. This decline is significantly higher than economists’ forecast of 9.30 million job openings for the same period. The health care and social assistance sector experienced the largest drop in vacancies, with 236,000 unfilled positions. The finance and insurance industry also reported a decrease of 168,000 job openings, while real estate, rental, and leasing had 49,000 fewer positions available. However, the information sector saw an increase of 39,000 job openings.
The job openings rate, which measures labor demand, dropped to 5.3% in October, down from 5.6% in September. This decline further highlights the cooling demand for labor in the US market. Despite the decrease in job openings, the hiring rate slipped only slightly, with a decrease of 18,000 to 5.886 million. However, the accommodation and food services industry, which had been a significant driver of job growth since the COVID-19 pandemic recovery, experienced a notable decline in hiring, with a decrease of 110,000 positions.
Workers Staying Put
One interesting trend observed in the JOLTS report is the decrease in resignations. In October, resignations slipped by 18,000 to 3.628 million. The quits rate, which is viewed as a measure of labor market confidence, remained unchanged at 2.3% for the fourth consecutive month. This data suggests that workers are less inclined to leave their current jobs, possibly due to uncertainty in the labor market or a desire for job stability. However, declining quits also point to slower wage growth and potential price pressures in the economy.
Impact on Interest Rates and the Federal Reserve
The decline in job openings comes at a time when inflation is subsiding. This combination of factors has led to increased optimism that the Federal Reserve may not raise interest rates further in the current cycle. In fact, financial markets and economists are even anticipating a rate cut in mid-2024. Rubeela Farooqi, chief U.S. economist at High Frequency Economics, believes that these data support the view that rates are at a peak and the Fed’s next move will be a rate cut, likely in the second quarter of 2024.
Since March 2022, the Federal Reserve has already raised its benchmark overnight interest rate by 525 basis points to the current range of 5.25%-5.50%. Despite the slowing labor market, the rate hikes have been gradual. The upcoming decision by the Fed to leave rates unchanged is expected to align with this cautious approach. The government is also expected to report an increase in nonfarm payrolls in November, albeit below the average monthly gain of the previous 12 months.
See first source: Reuters
FAQ
Q1: What does the latest JOLTS report indicate about the US labor market?
A1: The report shows a decline in job openings to the lowest level since March 2021, suggesting a cooling demand for labor in the US market.
Q2: How many job openings were reported in October?
A2: In October, job openings fell to 8.733 million, a decrease of 617,000 from previous levels.
Q3: Which sectors experienced the largest drop in job vacancies?
A3: The health care and social assistance sector saw the largest decrease in vacancies, with 236,000 unfilled positions, followed by finance and insurance, and real estate, rental, and leasing sectors.
Q4: What is the current job openings rate?
A4: The job openings rate fell to 5.3% in October, down from 5.6% in September.
Q5: How has the hiring rate changed?
A5: The hiring rate slipped slightly, with a decrease of 18,000 to 5.886 million. However, the accommodation and food services industry experienced a significant decline in hiring.
Q6: What trend has been observed regarding worker resignations?
A6: The report highlights a decrease in resignations, with resignations slipping by 18,000 to 3.628 million in October.
Q7: What does the quits rate suggest?
A7: The unchanged quits rate at 2.3% for the fourth consecutive month suggests that workers are less inclined to leave their current jobs, indicating a desire for job stability.
Q8: How might the labor market trend affect interest rates?
A8: The cooling labor market combined with subsiding inflation raises optimism that the Federal Reserve may not raise interest rates further, and may even cut rates in mid-2024.
Q9: What has been the Federal Reserve’s response to the labor market situation?
A9: The Federal Reserve has raised its benchmark overnight interest rate by 525 basis points since March 2022, but the rate hikes have been gradual. The Fed is expected to leave rates unchanged in the near future.
Q10: What is the expected report on nonfarm payrolls?
A10: The government is expected to report an increase in nonfarm payrolls for November, although the gain might be below the average monthly gain of the previous 12 months.
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