In October, job openings experienced a significant decline, reaching their lowest point in two and a half years, indicating a potential loosening of the historically tight labor market. According to the Labor Department’s report on Tuesday, seasonally adjusted employment openings totaled 8.73 million for the month, reflecting a decline of 617,000 or 6.6%. This figure was well below the Dow Jones estimate of 9.4 million and marked the lowest level since March 2021.
The decrease in job vacancies led to a shift in the ratio of openings to available workers to 1.3 to 1, a notable decrease from the previous few months when it was around 2 to 1. This ratio is now nearly in line with the pre-pandemic level of 1.2 to 1. Federal Reserve policymakers closely monitor this report, known as the Job Openings and Labor Turnover Survey, for indications of labor market slack. The Fed has been aggressively raising interest rates since March 2022 to slow down the labor market and curb inflation, and they are currently considering their next policy moves.
While job openings saw a significant decline, total hires only slightly decreased, and layoffs and separations saw modest increases. Quits, considered a measure of worker confidence in finding new job opportunities easily, remained relatively stable. The quits rate, which peaked around 3% of total employment during the Great Resignation in late 2021 and early 2022, has since declined to 2.3%.
The data solidifies the Fed’s decision to keep rates unchanged, with a keen eye on labor demand and wage pressure. Declines in job openings were observed across various industries, with the education and health services sector experiencing the largest decline (-238,000), followed by financial activities (-217,000), leisure and hospitality (-136,000), and retail (-102,000).
This Job Openings and Labor Turnover Survey comes just ahead of the Labor Department’s nonfarm payrolls count for November. Economists anticipate the report to show an increase of 190,000, a slight improvement from October’s figure of 150,000.
Fed officials have consistently expressed concern about the overheated job market as they aim to bring down inflation. The decline in job openings could be seen as positive news, suggesting that reduced labor demand might help align the job market with available supply.
The Federal Reserve’s upcoming two-day policy meeting is anticipated to result in unchanged interest rates. Market expectations suggest that rate cuts may begin in March as inflation data continues to show progress and the central bank addresses the potential risks of a slowdown or recession.
In other economic news on Tuesday, the ISM services index for November showed a reading of 52.7%, indicating the percentage of companies reporting expansion versus contraction. This figure was nearly a full percentage point higher than October and slightly exceeded the Dow Jones forecast of 52.4%. Gains in the survey were driven by inventory sentiment, inventories, and new export orders, while employment nudged higher to 50.7%, and prices edged lower to 58.3%. A reading above 50% in the ISM services index represents growth in the sector.