Labor Demand Cooled but Remained Tight in August
We may expect that quits rates will remain high for a few months before returning to pre-pandemic levels.
Total job openings decreased in 26 states in August. Ohio, Michigan and California topped the list of largest declines. Job opening rates, the percentage ratio of job openings to total current and potential jobs, posted decreases across all four regions (Northeast, Midwest, South and West).
In an earlier release, the Bureau of Labor Statistics (BLS) reported that there were 315,000 jobs added in August nationwide. As some people returned to the labor force, the number of active job seekers increased as well. Five states (Minnesota, Vermont, Utah, New Hampshire and Wyoming) had ratios of job openings to unemployed workers that were above three. There were 35 states with ratios greater than or equal to the national level of 1.7. Every state, and the District of Columbia, had ratios greater than or equal to 1, the Federal Reserve’s one-to-one target.
Hires were little changed in a majority of the states. Six states, led by Maryland, Alaska and Idaho, recorded increases in hires. Only Arizona, Connecticut and New Mexico saw hires decrease in August. Not surprisingly, the states with higher job openings, such as Alaska and Wyoming, also saw higher rates for hires. That marks a shift from July when hiring was slower and suggests that employers are better able to fill positions than they were earlier in the hiring cycle.
The national quits rates remained unchanged from July to August. In total, 28 states had their quits levels above the national average of 2.7%. As with job openings, Alaska, Montana and Wyoming were among the states that had the highest quits rates. Many Southern states continued to see higher quits rates accompanied by higher job openings and hiring rates than other regions. Higher interstate migration and economic growth in the South led to the greater numbers of job openings, hires and quits.
As both the Atlanta Federal Reserve Bank’s Wage Growth Tracker and ADP Pay Insight showed in August, job switchers enjoyed higher levels of wage gains compared with those who stayed in the same jobs. The strong monetary incentives to switch jobs likely play a vital role in the current strong labor market and high inflation environment. As the job openings to unemployed workers ratio stays above 1, we may expect that quits rates will remain high for a few months before returning to pre-pandemic levels.
The Bottom Line:
While the demand for workers was still strong compared with the historical average, the decrease in job openings in a majority of the states showed signs of demand easing in August. The Fed is looking for labor demand to more closely align with labor supply; we still have a ways to go on that front.