Cooling in the job market may be pausing

April 2, 2024

There were 8.76 million total job openings in February 2024, little changed month-over-month. January 2024 data were revised lower by 115,000 to 8.75 million. Job openings are down from the peak in March 2022 but are still 22% higher than the 2019 baseline average. Real-time data from Indeed Hiring Lab show a decline in job openings in February but a leveling-off in March. The cooling in the job market may be pausing.

Job openings declined in the private sector overall. Wholesale trade, retail trade and information all posted declines. Openings ticked up in several goods industries including mining and logging, construction, and durable goods manufacturing, pointing to a rebound in those sectors. There was also a leap in finance and insurance (+126,000), arts, entertainment, recreation (+51,000) and state and local government excluding education (+91,000). The growth in finance and insurance coincided with an increase in quits and a decrease in hires, showing unfilled demand in the sector.

The overall decline in the private sector was more than compensated for by a larger increase in the public sector. There were 91,000 new openings in state and local government excluding education. There is additional room to grow in that sector.

The ratio of job openings to unemployed job seekers, a leading indicator of balance in the labor market, edged down to 1.36 in February 2024 compared to 1.43 the month before. That was due to the recent mild uptick in unemployment. The ratio will decline further in the months ahead if job openings fall or the number of unemployed increases.

Total hires increased slightly month-over-month. The hiring rate of 3.7% is below the 2019 baseline average of 3.9%. Hiring in health care and social assistance; arts, entertainment, and recreation; and state and local government excluding education is above the 2019 baseline average and is helping drive job gains. Those are the sectors that have been the primary drivers of employment gains since mid-2023. They look to continue to be drivers of gains in 2024, with some shift from accommodation and food services to entertainment and recreation. Proprietary data from Vanguard show an overall downward trend in the hires rate over the past couple of years, but an uptick in February 2024. That shows resilience in the labor market.

Quits changed little month-over-month. The quits rate of 2.2% has not changed since November 2023 and is slightly below the 2.3% baseline average in 2019. Payroll processing company ADP found that the percent change in the median annual pay for job changers rose to 7.6% in February 2024 compared to 7.2% in January. That was the first month-over-month increase since November 2022. Though fewer workers are voluntarily leaving their jobs, the uptick may presage additional worker movements in the coming months.

Total layoffs inched higher in February 2024 month-over-month with slight increases in both the private (+113,000) and public (+15,000) sectors. The layoffs rate of 1.1% is just below the 2019 baseline average of 1.2%. Layoffs declined in professional and business services after a jump in January, while quits and hires both increased. Job openings remained little changed, suggesting there is room to grow in this sector. The Labor Leverage Ratio, calculated as quits over layoffs and discharges, is a proxy for worker bargaining power. Though it has declined from highs in 2022 as well as month-over-month, it is still higher than the 2019 baseline average. That suggests that despite news reports of layoffs at prominent companies, the current labor market is generally a favorable one for workers.