Ratio of job openings to job seekers is flat

March 6, 2024

The total number of job openings inched lower in January 2024 compared to December 2023, declining by 26,000. Total openings of 8.9 million remain well above the 2019 baseline average but are down 21% compared to the average monthly rate in 2022. Real-time job postings data from Indeed show a steeper downward trend.

The private sector listed an additional 79,000 openings over the month. As consumers continue to shift their spending towards services, job openings declined in goods industries, including construction, durable goods manufacturing and retail trade. One exception was nondurable goods manufacturing, which showed an increase of 82,000 jobs, recouping heavy declines in 2023 and suggesting the American consumer is foregoing goods purchases with a longer shelf life for those with a shorter one. Reflecting increased consumer demand, job openings increased in several service sector industries, such as finance and insurance, professional and business services, healthcare and social assistance, and accommodation and food services. Meanwhile, the public sector had a decline of 105,000 openings, though there remains unfilled demand.

The ratio of job openings to total unemployed job seekers remained flat at a ratio of 1.4, unchanged since November 2023. That is above the 2019 baseline average of 1.2 but is down from the 1.9 average monthly ratio in 2022. The Federal Reserve expects that a drop in job openings will continue to drive the cooling of the labor market as opposed to a surge in layoffs. The Indeed Hiring lab data suggest that the rebalancing of the labor market is further along than the data suggest. In the months ahead, the Fed would like to avoid a jump in unemployment via layoffs to cool the labor market. That is not where it was a year ago, but the progress made on inflation without suffering a surge in unemployment has limited that downside risk for the Fed.

Total hiring inched lower in January 2024, both in absolute terms and in the hiring rate. The total hiring rate of 3.6% is well below the highs of 4.5 - 4.6% in 2021 and 2022 and is also below the 3.9% baseline average for 2019. Though hiring was slightly lower in state and local government (excluding education) month-over-month, the January 2024 figure of 179,000 was 13% higher than the 2019 baseline average of 158,000.

Total quits continued their downward trend. The January 2024 quit rate of 2.1% is lower than the 2019 baseline average. Total private quits, a leading indicator of the health of the private sector job market, also declined in recent months. That drop in quits suggests workers are less sanguine about the overall economy and see a lower premium for switching jobs. The new report by payroll processing company ADP found that even though the median wage premium for job stayers declined month-over-month, the premium for job switchers inched slightly higher. Overall, workers are staying in their current jobs.

This is good news for the Federal Reserve and its fight against inflation. At the same time, reduced churn could result in increased healthcare usage and spend by employees, adding to inflationary pressures. Reduced quit rates have enabled workers to learn the jobs they're in and firms to catch up on training deferred earlier in the recovery; these shifts likely added to productivity growth over the last year.

Total layoffs decreased in January 2024, and remain lower than the 2019 baseline average. The story here is the divergence between the private and public sectors. Private sector layoffs remained roughly flat, though certain industries had a large increase, including professional and business services, which jumped 24% month-over-month. At the same time, job openings also increased in this industry, reflecting organizational restructurings, potentially in response to GenAI, and a correction from the previous rapid hiring pace. Public sector layoffs, meanwhile, declined 34% month-over-month, pointing to the relative strength of the sector and its potential ability to absorb increased employment over the rest of 2024.