Job openings and quits continue to moderate

REAL ECONOMY BLOG | November 30, 2022

Authored by RSM US LLP

Job openings fell in October to 10.3 million, continuing to signal moderation in labor demand amid the Federal Reserve’s aggressive rate hike campaign.

Since its peak in March, when the Fed began increasing rates, the number of job vacancies has dropped by almost 13% as the impact of the tightening has set in, according to data from the Bureau of Labor Statistics released Wednesday.

Still, the pace of moderation might be too slow for the Fed to move away from its tightening course, starting with a likely 50 basis-point rate hike in December and moving closer to the 5%-to-5.5% range in the first half of next year.

There remained 1.7 job vacancies per unemployed worker, significantly higher than 2019’s average of 1.2.

Barring any shock, the number of job openings won’t come back down to the pre-pandemic level until the end of next year. That timeline is well aligned with our forecast of a recession in the second half of next year.

The sign of moderation also showed up in hiring and quit rates, which both dropped by 0.1 percentage point to 3.9% and 2.6%, respectively. The hiring rate peaked at 4.5% in February while the quit rate peaked at 3.0% last December.

That suggested that the potential of a recession made workers and employers think twice about quitting and hiring.

But that does not mean the labor market has come close to its pre-pandemic level. Most labor market indicators have a lag time, which means we won’t see a sharp drop-off before a recession takes place.