News Analysis
The American economy’s hiring boom is officially over.
According to the Department of Labor’s just released Job Openings and Labor Turnover Survey, known also by its acronym JOLTS, the number of open job positions in the United States fell to just 8.7 million nationally as of the end of October.
That fall was a surprise to economists, which had originally forecast the number of open positions to stay at September 2023’s level of 9.3 million, a value recently downgraded from the original 9.6 million openings announced at first for that month.
The 8.7 million drop in openings works out to a 6.5% in openings on a month-to-month basis.
It is also down by a net 9.4% in open positions since the end of August’s 9.61 million unfilled jobs total.
This makes this the lowest total number of jobs available in the U.S. since March 2021. That was in the early months since pandemic lockdowns had paralyzed the economy for most of 2020, and before massive stimulus spending had been injected into the economy in full force to attempt to get business back into full hiring mode.
That spending, coupled with growing optimism that the economy was on its was back from one of the deepest recessions in modern U.S. history, and driven by several major infrastructure and related spending bills passed by Congress in 2021, paid off in substantial job growth. Total job openings peaked at 12 million as of March 2022.
Hiring also soared in 2022, with over 4.5 million new people added to payrolls that year. After an estimated 20 million people lost their jobs during the plandemic era, it was a sign that American business was back. Education and health services led that growth, with 950,000 new hires that year. Other job categories which also bounced back dramatically in 2022 were in the leisure and hospitality industry, with 946,000 positions added, professional and business services with 605,000, manufacturing with 379,000, and government with 300,000. The average monthly job growth in 2022 was 562,000.
That average monthly job growth since then has slowed dramatically. The mean job growth per month for the twelve months ending October 2023 was just 258,000. That is a decline of 304,000 per month, or 54% since last year’s average figures.
Total hiring in the last three months is also down significantly. According to figures recently adjusted by the Labor Department, in August non-farm payrolls were up by 165,000 (recently lowered from the original 227,000 number reported earlier). In September the hiring surge was 297,000, again corrected downwards from the previous 336,000 calculations. In October total hiring was 150,000; that number be also be adjusted when the latest hiring figures are released on December 8.
While the absolute hiring numbers may be down, the economy has continued to surprise with unexpected hiring surges in recent months. A 150,000-person hiring rate per month still represents a strong showing for an economy which has been on a growth surge for almost two years now. This is also happening as layoffs in certain industries have begun to grow, which shows business is overall remarkably resilient, even if hiring rates are down.
Another factor to watch as new numbers are reported later this week is the gap between the total number of unemployed and the number of available job openings. As of October’s employment report, 6.5 million people were looking for work at that time. That number has risen only slightly during much of the boom period, but the gap between that number and the total of available positions has dropped by a significant margin since that time.
In March 2022, for example, when the total number of job openings hit its recent peak of 12 million, total unemployment in the U.S. was 6 million people. At that time the unemployment rate was a record low of 3.6%. The gap between the number of unemployed and the number of open positions was 6 million then.
Using the new JOLTS report’s count of just 8.7 million unfilled positions and the most recently released unemployment data which showed 6.5 people out of work, that gap has dropped to 2.2 million.
The shift in the difference between total unemployed and positions open is being closely watched by the Federal Reserve Board and top-tier financial analysts. Job hiring pressures when the gap is large is generally considered a fundamental indicator which would tend to keep inflation high, as companies need to pay more both to retain their best current employees and to attract the best news ones from the hiring pool. A much lower gap points to more than just that the economy is cooling; it also would indicate inflationary pressures will continue to subside.
In June 2022, when Team-Biden was pumping the economy hard with new money for infrastructure growth, and the American oil and gas industry taking advantage of NATO's war on Russia through Ukraine, inflation rates in the U.S. skyrocketed to a high of 9.1%. At the time the Treasury Department feared that high inflation rate, coupled with low unemployment and that large gap between total openings and the numbers of unemployed, would shove the economy into a period of endless “stagflation”, in which inflation would remain high while business growth itself would soon be cooling off.
That led to a period in which the Federal Reserve Board rose prime lending rates to its current target margin of between 5.25% and 5.50%. The last increase the Fed added was a 0.25 percentage point increase. That took place in July 2023.
Since inflation rates in the U.S. peaked now almost 18 months ago, lower price points in just about everything brought those rates down substantially. For the month of October 2023, it had dropped to 3.2%, a number roughly one-third of what it was at its worst in mid-2022.
For business and consumer borrowers alike, that is good news.
That, along with the much lower job openings numbers just announced, would on its own suggest inflationary pressures are down and going to stay down. A further positive piece of data which will also keep consumer prices down comes from the fossil fuel industry, which has seen oil prices fall from a high of $97/barrel as of the end of September 2023 to just $77.20 a barrel for Brent Crude, a standard benchmark value, as of December 5, 2023. That drop is tied to record oil production levels in the United States and lowering global demand for oil.
While it will take some time for those lower prices to make their way to local gas pumps, lower costs for oil are expected to drive inflation numbers down even lower from their current 3.2% value.
The two data points of inflation being down by even more this month, along with the lower job openings numbers which say the economy is continuing to cool, are expected to keep the Fed from raising prime lending rates this month.
What financial analysts are now watching is whether the trendline in job openings drops is steep enough to question whether the country could move into a recession in 2024. With the new JOLTS report showing that the rates at which people are quitting their jobs and at which layoffs are happening are both remaining roughly flat on a month-to-month basis, indicators suggest that probably will not happen, despite that the hottest growth period of the economy for many years does seem to have cooled off for now.
That layoffs rates are remaining flat also suggests businesses are easing into a period in which they can balance out expenses more by natural attrition rather than sharp reductions in the workforce. That means less shock waves for the economy for now.
Investors are also putting their money where their minds are on this. The yield on 10-year Treasury bonds fell to their lowest since September, as investors bid lower rates for the bonds in expectation that the Fed might even consider lowering interest rates.
The hiring data for November will be released by the Bureau of Labor Statistics in just two days. Economists are currently projecting hires may increase slightly from last month’s 150,000 adds to 180,000, based on an average of forecasts gathered to date.