Job openings dropped in November

January 3, 2024

Modest cooling in labor demand

Job openings edged down to 8.8 million at the end of November from 8.9 million in October. That is still more than 25% above the level hit before the onset of the crisis in February 2020 and well in line with real-time data on job posting sites, which show that labor demand stabilized around that level through year-end 2023.

The decline in job openings was highly concentrated in a few sectors. Transportation, warehousing and utilities alone shed 128,000 job openings and accounted for much of the drop during the month. The heavy freight industry has been in a recession much of this year. Employment in transportation and warehousing has contracted in seven of eleven months through the November payroll report. That said, the sector is still has 15% more workers than it did in February 2020. It moved from driver to a drag on employment gains.

The situation across other industries is more mixed. Leisure and hospitality, professional and business services, nondurable goods manufacturing and the federal government reduced their job openings marginally. Wholesale trade, construction, retail trade and financial activities increased job openings.

The ratio of job openings to job seekers edged up to 1.4 from 1.3 in October, attributable to the decrease in unemployed individuals as the unemployment rate fell from 3.9% to 3.7% in November. While still indicating more than one job opening per unemployed job seeker, the labor market is moving towards a balance more aligned with the pre-pandemic level of 1.2, compared to the peak ratio of 2.0 in December 2022.

Hirings in November decreased by 363,000, marking the largest monthly drop since July 2020. This decline was widespread, with the professional and business services sector accounting for 45% of the reduction. The slowdown in hires points to potentially slower job growth in December as businesses reassess their hiring needs in response to decreased demand.

Layoffs decreased this month, reflecting the low levels of initial unemployment insurance claims in the fourth quarter. Companies, recognizing hiring challenges, are increasingly focusing on how to best retain and restructure their workforce.

After the conclusion of the United Auto Workers' (UAW) strike at the end of October, no significant impacts were observed in November. However, the newly negotiated contracts between UAW and auto manufacturers will influence hiring decisions and boost the wage growth of auto workers in the coming months.

The quit rate declined to 2.4% from 2.6% in the previous month, with 3.3 million resignations. That is the lowest quits rate since August 2020. As labor demand cools, the reshuffling of workers has also slowed down. The lower labor turnover could lead to increased productivity, as suggested by recent data.

Private data sources continue to report a decrease in wage growth for job switchers. In November, wage growth fell to 8.3%, the lowest since June 2021. Additionally, wages for new job postings dropped to 3.8%. These trends, coupled with declining quit rates, indicate a significant cooling in wages, which is a necessary condition for the Federal Reserve to feel more comfortable in cutting rates. Wage gains remain above levels consistent with the Fed's 2% inflation target.

Small businesses, those employing fewer than 250 individuals, accounted for over two-thirds of job openings and nearly three-quarters of hires, quits and layoffs in November. Although these figures, except for layoffs, were lower than the previous month, they align with earlier months of 2023, showcasing the resilience and adaptability of small businesses in a challenging financial climate.