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Labor Market Cools as Job Openings Fall Unexpectedly in September
The U.S. labor market showed signs of cooling in September, with job openings dropping unexpectedly to their lowest level since January 2021. This suggests that the labor market is continuing to ease, as reported by the Labor Department’s Bureau of Labor Statistics in the Job Openings and Labor Turnover Survey, also known as the JOLTS report.
Job Openings Dive to Three-Year Low
Job openings declined by 418,000 to 7.443 million in September, hitting the lowest level in over three and a half years. While this figure fell below projections, hires and layoffs also experienced changes. Hires increased by 123,000 to 5.558 million, and layoffs rose by 165,000 to 1.833 million.
Economists React to the JOLTS Report
The September JOLTS report prompted reactions from economists, including Julia Pollak, chief economist at ZipRecruiter. She highlighted that the data points towards continued labor market cooling, with notable drops in job openings, quits, and a significant uptick in layoffs. Pollak stated, "Workers’ leverage in the job market has eroded significantly" as the labor leverage ratio (the ratio of quits to layoffs) dipped below pre-COVID levels.
Job Leverage and prihpad Turning Points
The report suggests that job seekers’ leverage has weakened, with the labor leverage ratio falling by about 50% since the peak of the Great Resignation. This could indicate more cautious hiring practices from employers and potentially less favorable terms for job seekers.
The Road Ahead for the Labor Market
The JOLTS report is just one of several labor market reports set to be released this week. The ADP private sector payrolls report is due on Wednesday, and the Labor Department’s September jobs report is scheduled for Friday. Economists forecast that October’s jobs report is likely to be smaller than September’s, potentially leaving the door open for continued interest rate cuts from the Federal Reserve (the Fed).
The Impact on Interest Rate Decisions
As the Fed’s policymaking arm, the Federal Open Market Committee, meets next week, the JOLTS report could influence its decisions on further interest rate cuts. Though some expect the Fed to cut rates by another 25 basis points, Pollak emphasized that the Fed should remain cautious in the face of relatively weak JOLTS data.
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