- The labor market is unambiguously cooling down as job openings have now declined by 1.3 million over the past two months.
- Job openings are now more aligned with measures of the labor market like the quits rate, which has been cooling off at a more consistent and slower pace.
- Layoffs remain low, with the February 1% rate below the average in 2019 of 1.2% However, the layoffs in tech and media are evident in the almost half percentage point jump in the Information sector.
- Workers still retain some bargaining power, but a continued slowdown will chip away at that leverage. This trend will hearten policymakers at the Federal Reserve as they seek to cooldown the labor market as part of their campaign against inflation.
As job openings stayed relatively high over the past few months, doubts were emerging that perhaps demand for workers wasn’t moderating as expected in the face of broader efforts to cool the overall economy. But today’s data offers some needed clarity—the US labor market is definitively cooling off. We now have two months of data showing a rapid decline in openings, which have fallen by about 1.3 million over the past two months. At this rate, we’d return to a pre-pandemic level of openings by this summer.
Of course, other metrics have shown a more consistent, if slower, cooldown. The quits rate has been declining fairly consistently since the spring of 2022 but still remains 13% above its 2019 average. If job openings are now on a similar trajectory as the quits rate, it might take longer to get back to a pre-pandemic level of demand.
The layoff rate, however, remains consistently low. The rise in layoffs last month seems to have been a head fake, with the aggregate rate still below its 2019 average of 1.2%. This isn’t to say layoffs aren’t increasing in some sectors. The rate in the Information sector, which contains many media and tech companies, rose by almost half a percentage point, to 1.9% in February.
Workers will be heartened by the continued strength of the US labor market, even as the pace of moderation might not be enough for some. Policymakers at the Federal Reserve continue to believe the labor market is out of balance and that they need to take more action to tame it.