Job openings dropped in October

December 5, 2023

In October, job openings decreased to 8.7 million, a notable drop of over 600,000 from the previous month. That decline, following two months of growth, signals a renewed downtrend in job openings, aligning with other high-frequency job posting data. After a robust period, labor demand cooled as we entered the final quarter of the year.

The reduction in job openings primarily stemmed from the private sector. The healthcare and social assistance sectors alone eliminated 236,000 job openings, contributing to 37% of the total reduction. Other industries, including accommodation and food services, finance and insurance and retail trade, also reduced their openings by over 100,000. As other leading indicators suggest, the economy in the fourth quarter is slowing compared to previous quarters. In response to decreased demand for products and services, businesses are reassessing their hiring plans. However, not all sectors are decelerating in hiring; the professional and business services sector added nearly 100,000 openings, rebounding from a significant drop in the summer.

The ratio of job openings to job seekers fell to 1.3, the lowest since August 2021 and approaching the pre-pandemic level of 1.2. While still indicating more than one job opening per unemployed job seeker, the labor market is approaching a better balance than the peak ratio of 2.0 seen last December. This shift is partly due to a rise in unemployment, with a substantial contribution from the slowdown in job openings.

Hiring in October remained consistent with recent months, suggesting the potential for robust job growth in November. Layoffs increased slightly, mirroring a modest rise in initial unemployment insurance claims. The transportation, warehousing and utilities sector experienced higher layoffs, indicating ongoing sectoral slowdowns.

Neither the writers' or actors' strikes, nor the United Auto Workers' (UAW) strike, significantly impacted October's layoffs. With both strikes concluding in November, substantial effects on future layoffs are unlikely.

The quit rate in October stayed at 2.3%, equating to 3.6 million resignations, akin to 2019 levels. That stability in recent quarters marks an end to the "great resignation" era. As employees settle into new roles, recent data suggests increased productivity growth.

Reports from private data sources continue to show a decrease in wage growth for job switchers. In October, wage growth fell to 8.4%, the lowest since June 2021. Additionally, wages for new job postings have dropped below 4%. These trends, alongside declining quit rates, indicate a significant cooling in wages, which the Federal Reserve views favorably. As wages moderate, the Fed's efforts to control inflation looks easier.

Small businesses, those employing fewer than 250 individuals, represented over two-thirds of job openings, close to three-quarters of hires, quits and layoffs in October. These figures, except layoffs, were lower than last month, suggesting a less dynamic labor market for small businesses. However, these figures align with earlier months of the year, emphasizing the resilience and adaptability of small businesses in challenging financial climates. As economic forecasts predict a cooler fourth quarter, job openings and hiring are expected to slow.