Key points:

  • The US labor market continues to cool off as a variety of measures continued their 2023 trends in January. 
  • The quits rate ticked down to 2.1% in January 2024, the lowest rate since August 2020. At the same time, hiring slowed down and remains below its pre-pandemic level.
  • Layoffs continue to be very low and the layoff rate has only been above its pre-pandemic low of 1.1% twice over the past three months.

After the surprisingly strong January jobs report, there was some speculation that the US labor market was heating back up after several months of consistent cooling. Today’s JOLTS data undercuts that argument in a large way. Employers continue to bring jobless workers onto their payrolls, but people with a job are staying put. The quits rate in January dropped to 2.1%, the lowest rate since August 2020. At the same time, the hires rate (despite a slight uptick in January) is trending downward on a three-month basis and the layoff rate remains historically low. For many, job security remains high. But the temperature of the labor market is not rising: If anything, it’s dropping.

The once high-flying quits rate continues to fall and is now below its pre-pandemic level, which could signal both that workers who found good opportunities over the past few years are happy to stay in their new roles, and that workers are feeling less confident about their prospects for finding a new job. Either way, the ongoing slowdown in quits is significant. Over the past three months, the overall quits rate has averaged 2.2%, down from a recent three-month average peak of 3% reached in January 2022, and the decline has been even more notable in several bellwether industries. The quits rate for Retail Trade came in at 2.3% in January 2024, down more than half from its peak rate of 4.7% in August 2021. 

On the other side of the job separation ledger, layoffs remain very low even after revisions pushed a few months in 2023 upward. The layoff rate continues to be below its pre-pandemic average and once again fell below its pre-pandemic all-time low. Over the past three years, we’ve only had two months in which the layoff rate was above its pre-pandemic low of 1.1%. 

While the market cools and more employed people stay put, some 44 million Americans still made the choice to voluntarily quit their job in 2023, 5% more than in 2019 and still an elevated level. The question is if quits will continue to cool through 2024 and perhaps fall below pre-pandemic levels. Such a trend would keep downward pressure on wage growth and relieve some inflationary concerns. The data are trending in that direction, but the market still has some way to go.