Job openings data is a key metric to help us gauge the health of the labor market. September’s job openings and JOLTS report data shows a slowdown in job creation, this goes along perfectly with the current trend of hesitancy in the economy.
The following is from the Bureau of Labor Statistics's report, “The number of job openings was little changed at 7.4 million on the last business day of September but was down by 1.9 million over the year. The job openings rate, at 4.5 percent, changed little over the month. The number of job openings decreased in health care and social assistance (-178,000); state and local government, excluding education (-79,000); and federal government (-28,000) but increased in finance and insurance (+85,000).” Analyst expectations for September were 7.9 million. September’s actual reading was the lowest we have seen since the start of 2021, it is down 1,318,000 openings from September of last year. August’s reading was revised down 179,000 openings.
The Job Openings and Labor Turnover Survey (JOLTS) was also just reported. Josh Schafer of Yahoo Finance wrote the following about the JOLTS report, “5.55 million hires were made during the month, up from 5.43 million seen in August, while the hiring rate rose slightly to 3.5% in September, up from 3.4% in August.”
The labor market has been rather strong in recent months due to historically low levels of layoffs and solid wage increases. Employees leaving their jobs are also at historic lows, down to 2.88 million in September. This is the first time that quittings have dropped under 4 million in the last 4 years. However, job openings have been struggling for a while. High interest rates post-pandemic have created tight financial conditions for businesses, causing them to scale back their hiring practices. The path ahead looks strong for the labor market. Jeffry Bartash of MarketWatch writes, “The labor market is no longer red hot, but it’s still pretty warm.
Businesses aren’t laying off many workers, unemployment is low and the U.S. is still adding enough jobs to absorb most of the people entering the labor force. A cycle of Fed interest-rate cuts, what’s more, could spur the economy and lead to more hiring in 2025.”
Investors have been closely watching labor market data to see if it will indicate the direction that the Federal Reserve will go with rate cuts at their November 7th meeting. Recent labor market data, September job openings included, has shown a labor market that is cooling down somewhat. This could bode well for additional rate cuts at the Fed’s meeting next week. The main goal of the Fed’s interest rate cuts is to strengthen the labor market, if the market is still struggling, the Fed will be more apt to cut rates. The market is pricing an almost 100% chance of a mild 25 basis point cut from the Fed next week, with a very small number of pessimists seeing the Fed holding rates steady. Slower labor market growth will push the Fed towards a rate cut, even if it is just 25 basis points.
To be clear, the labor market is cooling, it is by no means cooled off. Gregory Daco, Chief Economist at EY, told Yahoo Finance, "We saw a slight rebound in the hiring rate, which shows you that essentially the floor is not falling under the labor market. But instead, what we're seeing is a gentle cooling of labor demand and less labor supply absorption, nothing catastrophic." The labor market can’t be red hot forever, there will have to be periods of cooler action and contraction. Overall trends point to a healthy path forward for the labor market.
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