The latest Job Openings and Labor Turnover Survey (JOLTS) report released by the Bureau of Labor Statistics on January 3rd showed that job openings fell slightly in November 2022 to 8.79 million. This marks the lowest level of openings since March 2021 and indicates a cooling labor market after over a year of strong demand.
- Job openings fell to 8.79 million in November, down from 8.92 million in October
- Hires and total separations also edged down
- The quits rate declined to 2.6%, providing more evidence of easing upward wage pressures
- Layoffs remained low at 1.1 million
- Job openings peaked at 11.9 million in March 2022 but have fallen 14% since then
Openings Down Broadly But Construction Still Strong
Job openings decreased in a number of industries in November, including retail trade (-274,000), health care and social assistance (-123,000), and information (-71,000). Notably, openings in the information sector have plunged over 70% since peaking in April 2022.
However, there was a bright spot in the otherwise cooling market – construction job openings rose to 416,000, the highest level since January 2022. This likely reflects ongoing labor shortages in the industry despite the broader demand downturn. Over 300,000 construction jobs remain unfilled nationwide.
|Change in Openings Oct-Nov
|Health Care & Social Assistance
Hiring Down But Quits and Layoffs Also Decline
Alongside fewer openings, November saw hiring slip as well – down to 6.13 million from 6.17 million in October. This aligns with the downward trend since the record high last April. At the same time, the quits rate fell to 2.6% of the workforce. This quit level is the lowest since June 2021 and may reflect easing upward wage pressures as the balance of bargaining power shifts slightly back towards employers.
Additionally, the number of layoffs remained near historic lows at just 1.1 million, barely changed from October. So while hiring is slowing in response to decreased labor demand, employers appear cautious of letting workers go in a still tight market.
Job Market Remains Healthy But Cracks are Showing
Despite cooling somewhat, the job market remains fairly strong with nearly 1.4 open positions for every unemployed worker in November – well above the historical norm. Hiring also continues at a robust clip even if off 2022 highs.
However, signs of cracks are evident. Job postings tracked by Indeed have plunged over 15% since January 2023. More layoff announcements have cropped up in areas like tech and media. Job search times have stretched longer and workers appear less willing or able to quit their roles.
So while the labor market remains healthy relative to history, it does seem to be past peak conditions for job seekers. Power has shifted somewhat back towards employers compared to last year’s red hot demand and wage growth.
Fed Rate Hikes Likely Slowing Economy and Jobs Alongside Inflation
Much of the cooldown traces back to the Federal Reserve’s rapid interest rates hikes over the past year to tame inflation. The benchmark federal funds rate now sits in a target range of 4.25-4.50% – up over 400 basis points since early 2022. This surge in rates raises borrowing costs for consumers and businesses, slowing demand across the economy including for hiring.
On the positive side, this demand destruction appears to be having the intended effect on inflation. Consumer price increases have steadily moderated from over 9% last summer to just over 6% in November. With inflation showing real signs of returning to the Fed’s 2% target, there is hope the central bank can pause its aggressive tightening early this year.
Outlook: Job Growth Moderating but Labor Market Still Tight
Economists widely expect job gains to continue moderating in early 2023 along with broader economic activity. Forecasts peg monthly gains falling from 2022’s breakneck pace of over 400,000 to around 100-200k – still solid growth that can dent lingering labor shortages. The unemployment rate, currently sitting at historic lows of 3.5%, will likely tick higher but is expected to remain around the pre-pandemic 50 year average of 5.5%.
So while job seekers are losing a bit of bargaining power, the labor market should avoid plunging over a cliff. Employers must remain cautious of laying off workers even as openings decline since large numbers of unfilled positions remain. The still tight conditions will likely prevent wage growth from reverting to pre-pandemic trends either. Ultimately the soft landing scenario remains in play, though risks such as an overzealous Fed remain.
This concludes the breaking news story on the latest job openings data indicating a cooling but still healthy labor market. Let me know if you have any other questions!
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