Job Openings Drop from Record Highs
While quits stayed high, rising interest rates began to negatively affect labor demand.
Job openings decreased to 10.1 million in August, a 1.1 million drop from 11.2 million in July. The last time that total job openings fell below this level was in June 2021. The slowdown in job openings was broad-based. Only construction and wholesale trade saw positive month-over-month changes in August. The largest slowdown in job openings came in health care and social assistance, other services and retail trade. This is consistent with data from Indeed.
The number of job openings per unemployed person, a figure that the Federal Reserve watches closely, fell from a record high of 2.0 in July to 1.7 in August. The move down in the ratio in August was due to both a drop in job openings and an increase in the participation or the number of job seekers. That is good in that it suggests that red hot labor market may be cooling but not enough to alleviate concerns about inflation. The Fed would like to a much lower 1:1 ratio of job openings per worker seeking employment.
The rate of hiring was unchanged at 4.1%; 6.3 million people were hired in August compared with 6.2 million in July. The rate of hiring in the private sector stayed at 4.5%, well above the abysmal 1.8% pace of the public sector. The pace of hiring in state and local education was even lower, at 1.6%, despite acute staffing shortages. Public sector wages have fallen even further behind those in the private sector in the wake of the pandemic.
Leisure and hospitality and professional and business services drove increases in hiring in the private sector. Hires also picked up the information industry, despite widespread reports of hiring freezes and layoffs in the tech sector. The category includes everything from the production of content for streaming service, block buster movies and tv shows.
Hiring slowed in the construction sector, which is the most interest-rate sensitive of sectors. Home builders have seen their backlogs disappear as mortgage rates surged along with cancelations.
The total number of separations ticked up to 6.0 million; voluntary quits rose from 4.1 to 4.2 million; layoffs and discharges rose from 1.4 to 1.5 million. That is still a very high level of quits versus layoffs and suggests that turnover in the labor market remains elevated.
Two sectors stood out in terms of quit rates. The quit rate in low-wage leisure and hospitality jobs increase to 6.1%, the highest since July 2021. The quit rate in the professional and business services sector fell to 3.0%, the lowest since March 2021. Total separation remained steady at 358,000 for those who retired, transferred to different locations or were disabled.
The Bottom Line:
Job openings cooled from a boil to hot simmer in August. Employers found it easier to fill open positions than they did earlier in the year, but turnover in the labor market remained elevated. That will not be enough to calm concerns about inflation within the ranks of the Federal Reserve.