Job Market ‘Unraveling the Way We Wanted it To’

The August JOLTS

Published on Oct 5, 2022

Written by Tim Hatton & Echo Liu

Job openings in the US dropped sharply by over 1 million in August, while layoffs, hires, separations, and quits all stayed near similar levels. This indicates employers are taking down unfilled listings but holding onto their current workforce. 

The monthly Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics showed there were 10.1 million US openings in August, down from 11.2 million in July. This is the lowest number of openings recorded since June 2021. 

Line chart showing monthly job openings

While 10 million openings is still historically high—monthly openings in 2019 averaged near 7 million—today’s JOLTS indicates that the labor market tightness may have peaked, and future months could see further easing. In July, there were only 51 workers for every 100 jobs (a figure that had been relatively steady for several months), but as of August, that number jumped up to 60. 

Line chart showing number of employed individuals per job opening

This morning, Lightcast Chief Economist Bledi Taska and Senior Economists Elizabeth Crofoot and Layla O’Kane hosted a live broadcast to discuss their first impressions and analysis of the new data. Listen to their commentary here

“Employers are thinking about who they don’t need to hire, but not thinking about who they need to lay off,”O’Kane said during the broadcast. 

This JOLTS report was highly anticipated because of how it might affect the Federal Reserve’s decision-making in its ongoing fight against inflation. Along with energy and food prices,  the tight labor market of the past several months has driven inflation by putting upward pressure on wages, so a cooling labor market would be a sign the Fed’s interest rate hikes are working. The challenge is to ease that pressure without causing job loss or other economic hardship for individuals. Seeing openings come down without seeing layoffs rise is an indication it could be possible. 

“The labor market is unraveling the way we wanted it to,” Taska said. “We wanted it to go down, but hires and separations stayed the same. There’s still hope for a soft landing.”

But while the drop in openings  is welcome news from a wage-pressure perspective, it’s still a secondary concern compared to inflation itself. The Personal Consumption Expenditures index, the Fed’s preferred measure of inflation, showed last week that core inflation has risen 4.9% over the past twelve months, indicating that interest rates would be raised again.

“The Fed is not going to quit until the inflation level goes down,” Taska also said. “That’s the one number they are focused on. This is good news, but not significant enough to change what the Fed wants to do.”

The large drop in openings happened relatively evenly across the entire job market, with decreases reported across all but the smallest employers (with nine or fewer employees). Health care and social assistance saw the greatest decline (down 236,000 openings), followed by other services (down 183,000) and retail trade (down 143,000).

bar chart showing total monthly change in job openings

Despite this cooling, the mostly consistent level of quits shows that the labor market still heavily favors workers looking for jobs, while employers are in a tight race for talent and will need to continue refining their strategies for attracting and retaining workers. 

bar chart showing layoffs and quits over time

“Employees are still in the driver's seat in this labor market,” O’Kane said. “Workers are willing to look for new jobs and they continue to find new opportunities.”

The September Employment Situation report, coming out Friday will provide the next piece of the puzzle as the labor market continues adapting to new pressures and economic conditions.  Lightcast Senior Economists Ron Hetrick and Rucha Vankudre will present their live analysis at 9 a.m. ET on Friday on the Lightcast LinkedIn and YouTube pages.