Job openings near a four-year low

October 29, 2024

The US listed 7.4 million job openings at the end of September, down from a revised 7.9 million openings in August. That is the lowest number of job openings since January 2021.

Real-time data from Indeed Hiring Lab show that job postings have been flat since May but have hit a slight downward trend in October. Taken together, the data suggest a labor market that is cooling but resilient.

Declines in job openings were broad-based across different industries. Openings declined month-over-month in the three main industries that have powered job gains since mid-2023: healthcare and social assistance (-178,000), leisure and hospitality (-111,000) and state and local government (-104,000). That is a warning signal and raises the question of where future job gains will come from. Hurricane Helene in late September may have contributed to a drop in openings in retail trade (-58,000) and construction (-40,000).

Bucking the general downward trend, job openings increased in finance and insurance (+85,000) and professional and business services (+77,000). In both sectors, openings recovered losses from August. Openings are still lower compared to a year ago, but it is a good sign that openings were strong in those areas.

The ratio of job openings to unemployed job seekers, a measure of balance in the labor market and tracked closely by Federal Reserve officials, was nearly flat at 1.1 in September. We must enter the realm of the hundredth decimal point to discern month-over-month changes (1.11 in August to 1.09 in September). That is still below the pre-pandemic average. The ratio did not fall further in September because the decline in job openings was cushioned by a decline in the number of unemployed.

Some good news for the labor market: The month-over-month increase in the hiring rate increased to 3.5% in September. Though that is below the pre-pandemic average, it is above the lower rates we saw during the summer months. Hiring rose across industries, gaining 50,000 in manufacturing, 38,000 in retail trade and 33,000 in healthcare and social assistance. Despite new openings, hiring was flat in finance and insurance and professional and business services.

The layoffs rate increased in September to 1.2%, counteracting part of the positive dividend from a rise in hiring. That is now equal to the pre-pandemic average and comes after more than a year of low layoff rates. If layoffs were to creep up, that could boost unemployment, which the Federal Reserve is trying to avoid.

The drop in the quits rate showed additional labor market cooling; it fell to 1.9%. That is well below the pre-pandemic average and, apart from the initial months of COVID, is back to summer 2015 levels. Quits declined most in professional and business services (-94,000), while increasing most in retail (+41,000). The Labor Leverage Ratio, a proxy for worker bargaining power, lost ground in September.

Data from ADP show that the wage premium for switching jobs dropped to 6.6% in September from 7.3% in August. That is the lowest rate in three and a half years. It is down from a high of 16.4% in June 2022. That change aligns with the lower quits rate: Workers are increasingly staying put. The question is how hiring and layoffs will evolve. Additional layoffs would be less harmful if hiring picked up. If not, that would result in labor market weakness.