Key points

  • The labor market remains strong and continues to moderate at a slow but steady pace. 
  • The moderation in quitting we’ve seen this year in some high-turnover industries has been arrested.
  • The tech sector may be going through a painful recalibration, but the layoffs in the broader economy are still very low.

The labor market may be cooling down, but its moderation is milder than earlier this year. Two key measures of labor market strength showed a continued but slow reduction. The ratio of job openings to unemployed workers ticked down to 1.7 in October, continuing its downward trend this year. The quits rate has declined 0.4 percentage points from its peak back in December 2021. 

However, both metrics still indicate a hot labor market. The ratio of job openings to unemployed workers is still 42% higher than its 2019 average of 1.2. Similarly, the quits rate is 13% above the pre-pandemic baseline. Furthermore, the moderation of quitting in sectors that saw the largest rise in quits in 2021 has slowed down. On a three month average basis, the quits rate in Leisure and Hospitality is unchanged from where it was back in May.

The tech sector may be going through a painful recalibration, but the layoffs in the broader economy are still very low. The layoffs and discharges rate has been below its pre-2020 nadir for 20 straight months. The layoff rate in the Information sector, which contains many tech companies, is elevated but is an outlier among the broad industry groups.

Rumors of the labor market’s demise have been greatly exaggerated. The outlook for next year is still hazy with an aggressive Federal Reserve willing to raise unemployment to bring inflation down. But as we head to the end of 2022, the US labor market remains resilient.