Job Openings in U.S. Drop to Lowest Since March 2021, Indicating Potential Labor Market Shift
Job openings in the United States experienced a significant decrease in October, reaching the lowest level since March 2021, suggesting a possible easing in the tight labor market. The U.S. Labor Department reported a seasonally adjusted 8.73 million job vacancies for the month, marking a decrease of 617,000 or 6.6%. This figure fell notably below the Dow Jones estimate of 9.4 million.
This decline in job openings has adjusted the ratio of openings to available workers to 1.3 to 1, approaching the pre-pandemic level of 1.2 to 1. This change is noteworthy, considering the ratio was around 2 to 1 just a few months ago. The Federal Reserve closely monitors these figures, particularly the Job Openings and Labor Turnover Survey, for indications of labor market slack. Amid efforts to curb inflation, the Fed has raised interest rates since March 2022 and is deliberating its next policy move.
Despite the drop in job openings, total hires remained relatively stable, with only a slight decrease. Layoffs and separations saw modest increases. The rate of quits, often viewed as a gauge of worker confidence in finding new employment, remained largely unchanged at 2.3%, down from a peak of around 3% during the period known as the Great Resignation.
Economist Tuan Nguyen of RSM sees the data as reinforcing the Fed's decision to maintain interest rates while seeking signs for a potential policy shift in the upcoming meeting. The reduction in job openings, considered an indicator of labor demand and wage pressure, is of particular interest to the Fed.
The decline in job openings was observed across various industries, with notable reductions in education and health services, financial activities, leisure and hospitality, and retail.
The labor market data arrives just days before the Labor Department’s nonfarm payrolls report for November, which economists predict will show an increase in job additions compared to October.
Federal Reserve officials, who have been focusing on the robust job market as a key factor in their inflation reduction strategy, may view the decrease in job openings as a positive development. It could indicate a rebalancing of the labor market, addressing the previous substantial mismatch between labor supply and demand.
The Federal Open Market Committee is set to meet next week, with market expectations leaning towards keeping interest rates unchanged. Traders anticipate potential rate cuts starting in March, based on hopes that inflation data will continue to show improvement and as the Fed aims to prevent an economic slowdown or recession.
In related economic news, the ISM services index for November showed a slight increase from October, indicating expansion in the services sector. The survey noted gains in inventory sentiment, inventories, and new export orders, with employment and prices experiencing modest changes.