JOLTS show a cooling but stable labor market

February 4, 2025

Job openings cooled down at the end of December: There were 7.6 million according to the latest Job Openings and Labor Turnover Survey (JOLTS). That's a loss of over one-half million from November; it reversed a steady upward trend of openings.

On a three-month moving average basis, however, job openings have been in a range between 7.6 to 8 million since June. The response rate in the JOLTS survey is much lower than it was pre-pandemic. Large monthly fluctuations mask the overall trend of a steady labor market that cooled over 2024.

Real-time data from Indeed Hiring Lab show that advertised job postings have been flat since late November. They are still running around 10% above the pre-pandemic benchmark.

The largest job losses month-over-month occurred in professional and business services (-225,000), healthcare and social assistance (-180,000) and finance and insurance (-136,000). In each of those industries, openings returned to the level in September or October. That suggests that labor demand was steadier overall in the fourth quarter of 2024.

Job openings were flat in the public sector. Openings and employment are likely to drop over the next several months due to new policies.

Job openings in construction fell to the lowest level since April 2020. At the same time, the quits rate plummeted while layoffs stayed flat at a low level. The construction industry relies on immigrant labor; firms are hoarding labor as the administration's curbs to immigration take effect. Labor shortages are likely to push up prices in the housing market, which is already suffering from historically low levels of affordability.

The ratio of job openings to unemployed job seekers, a measure of balance in the labor market tracked closely by Federal Reserve officials, remained flat at 1.1 for the sixth straight month. That shows that the labor market remained steady in late 2024.

The hiring rate edged up to 3.4% at the end of December; the November rate was revised up to 3.4% from 3.3%. Despite the drop in job openings in finance and insurance, the hiring rate in this industry jumped to 2.4% in December from 1.7%. That shows labor demand may be recovering for some white-collar workers.

The layoff rate was flat at 1.1% for the fourth straight month. In the second half of 2024, the low hiring rate was offset by a low layoff rate.

The quits rate came in flat at the end of December at 2%. The consistent drop in the quits rate in 2024 contributed to a fall in wages. The employment cost index (ECI) for the fourth quarter found that compensation continued to slow, for workers in the private and public sectors. Wages are still growing faster in the public sector as they catch up to earlier wage gains in the private sector.

ADP data show that the wage premium for switching jobs was trending up but still one percentage point lower than a year ago (7.1% in December 2024 compared to 8.1% in December 2023). For those who stayed in their jobs, the median wage increase in December was 4.6%, the lowest since July 2021. Continued low voluntary attrition suggests wage increases will continue to slow. The Labor Leverage Ratio, a proxy for worker bargaining power, has been steady since September.