The latest reports from the Bureau of Labor Statistics both show a labor market that’s gradually cooling. There are times this would be bad news, but for now, most trends are in the direction we would want them to go.
The Job Openings and Labor Turnover Survey (JOLTS) data released for March showed that job openings were down slightly to 8.5 million, while the quit rate fell to 3.0% and the rate of hires also dropped from 3.7% to 3.5%.
“The job openings and labor turnover data for March 2024 is headed in the direction we want to see, which should calm some nerves,” said Lightcast Senior Economist Elizabeth Crofoot. “Hires also fell from a rate of 3.7% in February to 3.5% in March. Lower quits and hires means fewer workers are actively looking for other opportunities with higher pay, keeping wage pressures in check. As the churn in the labor market slows down, it will translate to lower prices.”
Lower churn, and the resulting ease in wage pressures, is what the Federal Reserve would have been wanting to see as it considers adjusting interest rates to curb inflation (on the same day of the JOLTS release, the central bank announced it was keeping rates steady and a hike was unlikely in the near future).
For that same reason, it ironically came as a relief to many that the monthly Employment Situation report came in cooler than expected: the US added 175,000 jobs in April, significantly below expectations of around 240,000. This slowdown was good news in the sense that it signaled the market wasn’t reaccelerating; nobody wanted the Fed to get spooked by a big number in the monthly payrolls and then slow things down with higher interest rates.
Also of note is that the unemployment rate edged up slightly to 3.9% (marking the 27th straight month under 4%), and the overall labor force participation rate ticked up slightly. So while the overall jobs number was lower than expected, nothing in this report speaks to a looming recession. Even if layoffs sometimes make headlines, we see a different story in the data.
“Tech is thriving, and the ongoing narrative of tech layoffs as an indicator of stress in the industry is not supported by this report,” said Lightcast Senior Economist Rachel Sederberg. “In fact, tech remains one of the few sectors where bachelor's degree holders are experiencing significant success in the labor force.”
The difference between degree and non-degree jobs is notable. White-collar industries such as banking saw a decline in April, while service industry sectors like hospitality and construction were up—a pattern worth watching as there’s high supply and low demand for workers with degrees and the inverse for workers without.
“The US Labor Market continues to be starved for jobs that do not require college degrees,” said Lightcast Senior Economist Ron Hetrick. “Retail trade employment set another post pandemic high, and restaurants have only had one down month in the past 16 months.”
Rethinking degree requirements, and introducing skills-based hiring, would be one way to help close that gap. In the meantime, lower turnover means employers are no longer in a mad scramble for staff and can instead focus on more refined talent intelligence strategies. For workers and students, this presents a new need and opportunity to develop new skills to be ready for the future. That’s the state of play in the labor market for now.
“Overall, we’re operating in a new normal,” Crofoot said. “While job openings are higher than pre-pandemic levels, it's not a cause for concern. Job openings are still steadily coming down and robust job and labor force growth suggests that a higher level of openings is sustainable, at least for the foreseeable future. The labor market is easing slowly and moving in the right direction."