The labor market is gradually softening.
Job openings fell to 10.3 million in October, continuing a months-long trend of declines. After an encouragingly large drop in August, openings rebounded in September. October’s decrease is a good sign that September’s rebound may have been a blip. But, openings are still historically high; there’s still more cooling to be done.
Layoffs remained low, at 0.9%. The hires rate decreased slightly to 3.9%.
The Fed’s aggressive interest rate hikes seem to be making their mark – openings decreased in particularly interest-rate dependent industries, like construction (-52,000). The Fed’s actions are not the only force impacting sectors’ openings, however. The openings rate dipped to 6.4% in transportation and warehousing, particularly due to slowing consumer spending on goods.
The quits rate – a measure of worker confidence in the labor market – decreased very slightly in October to 2.6%. Though it is dropping from highs earlier in 2022, the rate remains historically elevated. While the labor market still has options, workers’ inclinations to leave their current positions are slipping away.
Further Slowing Necessary For the Fed
The Federal Reserve is intent on cooling the labor market and closing the gap between labor supply and demand. Hopefully, this can occur by openings falling even further. However, Fed projections also predict that their interest rate hikes will increase unemployment from the current historic lows. Either way, the current inflation dynamics demand a change in the labor market conditions.
Inflation remains too hot, and the stark unbalance in the labor market is adding to inflationary pressure. The Federal Reserve will continue to be guided by key measures of labor market tightness, like openings and quits. These indicators moved in the right direction in October but remain too high for comfort.