Job openings largely limited to a few states

May 17, 2024

Total job openings in the United States continued a downward trend in March 2024. There were 8.5 million openings, down from 8.8 million in February and compared to the peak of 12.2 million in March 2022. Yet openings remain above the 2019 baseline monthly average of 7.2 million.

In March, job openings changed little in 37 states, increased in one state and decreased in 12 states. New Jersey led the gains with 51,000 new job openings, whereas California lost 119,000 and Pennsylvania shed 50,000; those were the largest losses.

Counting California, Florida, Massachusetts, Pennsylvania and Texas, 31 states reported lower average monthly job openings in the first quarter of this year. The opposite trend, or higher monthly job openings, showed up in 19 states including New York, New Jersey and Washington plus the District of Columbia.

The job market is cooling overall, but it is cooling faster in some places compared to others, especially previously booming markets like California, Texas and Florida. Real-time data from Indeed show job postings in many of these states are plateauing, suggesting they have reached a steady equilibrium without a negative employment shock.

The ratio of job openings to unemployed job seekers, which is an indicator of balance in the labor market, and something the Federal Reserve looks at, ticked down from 1.43 in January to 1.32 in March. This is the lowest rate since August 2021, but it is still above the 2019 baseline average. The average monthly ratio for the first quarter remains elevated in these states: Maryland (2.6), Minnesota (2.1) and Massachusetts (2.0).

Compared to March of last year, the unemployment rate increased in 38 states and Washington DC; it decreased in seven states and stayed flat in five. The largest increases were in Rhode Island (+1.3 percentage points), Connecticut (+1.1), Louisiana (+0.9), Maine (+0.9) and Washington (+0.9). Massachusetts recorded the largest drop (-0.6).

The number of hires moved in a similar pattern as job openings. Month-over-month, hires increased in New Jersey (+35,000) and New York (+24,000) but decreased in Texas (-109,000) and California (-16,000). Otherwise, hires barely changed in 43 states.

Quits remained similar in 40 states month-over-month. New York (+34,000) and New Jersey (+24,000) led the gains in quits. California (-71,000) and Texas (-39,000) led the losses. Changes in quits rates from the end of last year to the first quarter of this year point to continued cooling in the labor market. Only 13 states reported a higher monthly average quits rate quarter-over-quarter. Most were by only a few hundredths of a percentage point (e.g., New York from 1.70 to 1.73). The rates increased in Colorado (2.23 to 2.53) and Florida (2.70 to 2.83), though both trended lower month-over-month.

ADP data paint a mixed picture. Wages are continuing to cool for job stayers, whereas the premium for job changers has reversed course and moved up again in recent months. The overall quits rate is below the 2019 baseline average. This reflects cooling in the labor market, workers being settled in new jobs taken in the past couple of years and less worker confidence about switching jobs. However, worker burnout, the higher wage premium for job changers and more optimistic public narratives about the economy could push the quits rate higher in the months ahead.

Similar to job openings, hires and quits, the number of layoffs were little changed in 39 states. Layoffs increased in Pennsylvania (+29,000) and Florida (+23,000) but decreased in Texas (-78,000) and Minnesota (-30,000). The Labor Leverage Ratio, a proxy for worker bargaining power, increased month-over-month and remains higher than the 2019 baseline average. That suggests that the current labor market is largely favorable for workers.

Our own analysis of compensation gains and quits rates reveals that the tight relationship we have seen between the two since 2010 broke down during the height of the hiring frenzy and remained tenuous in early 2024. That suggests that compensation gains may not cool to the levels the Federal Reserve believes are more consistent with its 2% inflation target. The employment cost index (ECI), which is the best overall measure of compensation, rose 4.2% from a year ago in the first quarter of 2024, the same as the fourth quarter of 2023. That is still nearly one and a half percentage points faster than the ECI was rising in 2019, when inflation was closer to the Fed's 2% target.

Another issue is that the response rate of the JOLTS survey decreased from nearly 70% a decade ago to almost 30% in recent months. That may help explain the different signals from its indicators with those from real-time data sources.