Has Fed's labor market concerns eased?
US job openings fell significantly in December, marking the largest decline in 14 months and signaling a continued cooling of the labor market.
The Bureau of Labor Statistics’ latest Job Openings and Labor Turnover Survey (JOLTS) revealed that job vacancies fell to 7.6 million from a revised 8.16 million in November.
The decline was sharper than expected, with most forecasts predicting a smaller reduction. The pullback was primarily driven by professional and business services, which saw a notable drop after months of gains. Other sectors with major declines included healthcare, social assistance, finance, and insurance.
This downward trend in job openings aligns with the Federal Reserve’s stance that labor market conditions are no longer fueling inflation. With job vacancies shrinking, wage growth could also slow, easing inflationary pressures.
The ratio of job openings to unemployed workers – a metric closely monitored by the Fed – remained at 1.1 for the sixth consecutive month. This figure has steadily declined since peaking at 2-to-1 in 2022
Hiring remained stable at 3.4%, one of the lowest rates in the past decade, while the layoff rate showed no significant change. The quits rate, which tracks the percentage of workers voluntarily leaving their jobs, held at 2%, suggesting a drop in worker confidence about finding new opportunities.
Read next: Cooling US inflation gives Fed breathing room to focus on labor market
The latest figures come ahead of Friday’s monthly employment report, which is expected to show a moderation in hiring for January while maintaining a steady unemployment rate of 4.1%. The upcoming report will also include annual payroll growth revisions and updated Census Bureau population estimates.
Some economists, however, have raised concerns about the reliability of the JOLTS data due to its low response rate and frequent revisions. A separate job openings index by Indeed showed a slight increase in postings for December, adding another perspective to the evolving employment landscape.
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