In November, the number of job openings in America decreased to 8.8 million, down slightly from October and the lowest since March 2021, according to a report from the Labor Department. Despite this decline, the demand for workers remains strong by historical standards, even in the face of higher interest rates. The report also revealed that the number of people quitting their jobs, which is seen as a sign of confidence in the job market, fell to its lowest level since February 2021. This indicates that the job market is cooling off from its previous robust heights but remains solid.
The decline in job openings was particularly notable in the transportation, warehousing, and utilities sectors, which saw a decrease of 128,000 openings. The hotel and restaurant industry also experienced a decline of 78,000 job openings, while the federal government reduced job openings by 58,000. On the other hand, job openings in construction rose by 43,000 and in retail by 42,000.
The report, known as the Jobs Openings and Labor Turnover Summary, aligns with recent evidence suggesting a slowdown in the job market while still maintaining a strong foundation. Layoffs, for instance, remain at unusually low levels. The gradual decline in job openings since reaching a record high of 12 million in March 2022 is attributed to rising interest rates. However, even with this decline, job openings are still at historically high levels, as monthly job openings had never surpassed 8 million before 2021.
The Federal Reserve, in its efforts to combat inflation, has raised its benchmark interest rate 11 times since March 2022, reaching a 22-year high of approximately 5.4%. The intention behind this is to cool down the job market from its previously red-hot levels, thereby reducing pressure on businesses to raise wages and prices. The decline in job openings serves as a relatively painless means to achieve this objective. So far, the Federal Reserve seems to be on track for a "soft landing," avoiding a recession while slowing down economic activity enough to tackle high inflation.
Currently, the unemployment rate stands at 3.7%, close to a half-century low. Additionally, inflation is decelerating, with consumer prices rising 3.1% in November compared to the previous year, down from 9.1% in mid-2022. However, it is important to note that inflation remains above the Federal Reserve's target of 2%.
Looking back at the pre-pandemic period, the number of quits is now roughly at the same level as it was nearly four years ago. Throughout November of the previous year, American employers were adding an impressive 232,000 jobs each month. The upcoming December jobs report, set to be released by the government, is expected to show an addition of 155,000 jobs, which is still considered a decent number.
The Federal Reserve, which has kept its benchmark interest rate unchanged for three consecutive meetings, has indicated its intention to reduce rates three times in 2024. Rubeela Farooqi, the chief U.S. economist at High Frequency Economics, stated that the labor market remains strong overall, but demand is cooling and coming into better balance with supply. Additionally, wage and inflation pressures are decelerating. These findings are expected to be positively received by policymakers and support the Federal Reserve's view that the next move in interest rates will be a decrease.
