The low point was in September, which had spooked the Fed. But that’s over.
By Wolf Richter for WOLF STREET.
The reason we’re looking at the underlying dynamics of the labor market is to gauge the pressure within the Fed to cut interest rates to prevent the labor market from weakening. And in these underlying dynamics, there are no reasons for the Fed to cut interest rates further. The labor market is not weakening, it has been tightening just a little since September. Over the same period, inflation measures have accelerated some. And that combination has caused the Fed to move any rate cuts into the distance, and even Trump suddenly thought that this pivot to wait-and-see “was the right thing to do.”
Job openings, after two months of strong increases, gave up some of those increases in December and fell to 7.60 million, seasonally adjusted, in very squiggly month-to-month data. The low point was in September at 7.37 million openings (blue in the chart below).
The three-month average, which irons out those month-to-month squiggles and shows the trends of the underlying dynamics of the labor market, ticked up for the third month in a row from the low point in September, and even the September low point was still above the prior historic high point in late 2018 (red).
This date from the Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics today is based on surveys of about 21,000 work locations, and not on online job listings.
Job openings in relationship to nonfarm payrolls ticked up again and is still at levels that had never been seen before the pandemic. In December, job openings amounted to 4.9% of nonfarm payrolls, the third month in a row of increases. This shows that the labor market is still historically tight, though not nearly as tight as it had been during the labor shortages of the pandemic:
The figure Powell cites a lot: The number of job openings per unemployed person ticked down to 1.10 job openings for each person who was unemployed and looking for a job during the reference period (7.60 million job openings for 6.89 million unemployed people looking for work).
The ratio has remained in that range for the past six months, with a low point in September. It was in September that the Fed got spooked about further deterioration of the labor market. But that didn’t happen.
The ratio is relatively high – meaning a relatively tight labor market – compared to the prepandemic data going back to 2001, where only 2018 and 2019 had a higher ratio.
Voluntary quits have also turned the corner. The number of people who quit their jobs voluntarily in December rose to 3.20 million.
The three-month average, which irons out the month-to-month squiggles, rose to 3.20 million as well, the highest since August. This is the first time since the peak in mid-2022 that the three-month average is higher for a four-month period.
Quits are an indication of how emboldened employees feel to quit a job, such as to switch to a better job. Retirements, deaths, etc. are not considered “quits.” They’re categorized as “other discharges.”
The massive reshuffling in the workforce during the pandemic, when workers quit left and right to get better jobs, even in other industries, had triggered the biggest pay increases in decades as employers tried to retain their workers, or hire new workers to fill the slots that the quits had left behind.
Then the biggest employers cracked down, with huge layoff announcements that spiraled through the media, and some actual layoffs – while still hiring – which had knocked the confidence out of employees, and they put their nose to the corporate grindstone instead of quitting. And quits fell to relatively low levels, which created a lot of stability for companies, and productivity rose. But quits seem to have bottomed out now.
Quits directly impact job openings and hires. Fewer quits mean fewer newly open slots left behind that have to be filled, so fewer job openings, and fewer hires to fill those openings. The cycle of quits, job openings, and hires is just churn.
When the churn began to cool in the second half of 2022, fewer workers quit, so fewer jobs were left behind, and job openings plunged from the pandemic highs, and fewer people needed to be hired to fill those left-behind slots, and so hires plunged along with it. That was just churn, and it has cooled.
Hires to replace workers who quit or were laid off or discharged, and to fill new roles, rose in December after falling in the prior two months. The three-month average ticked down to 5.45 million. The low point was in August at 5.37 million.
Layoffs and discharges fell to 1.77 million in December. The three-month average also dipped to 1.77 million. They have “normalized” to the low end of the range during the Good Times before the pandemic. Getting fired is a standard feature in the American workplace even during the best times.
Layoffs and involuntary discharges include people getting fired with or without cause. It does not include retirements, deaths, etc., which are in the category of “other discharges.”
Layoffs and discharges as percentage of nonfarm payrolls, which accounts for growing employment over the years and for long-term views is the better metric to look at, dipped to 1.11%, well below any time during the pre-pandemic years in the JOLTS data going back to 2001.
So, compared to the size of nonfarm employment, layoffs and discharges are historically low, as employers are hanging on to their workers.
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The DOGE guru, Musk, is planning to churn the labor market by force. He wants Agencies to fire all their employees and have them all re-apply for their jobs. This will get rid of all the deadwood, and make the agencies meaner and leaner.
The 1,500 USAID workers who were WFH were told not to come to work. The offices in DC were shut down.
From “I’m from the gov’t and I’m here to help.”
to
“I’m from the gov’t and I need a job!”
As soon as a government worker gets a job, he stops working.
Federal civil service doesn’t work that way. He would need to do a Reduction in Force (RIF) for that, and that needs Congress. That is why they are doing the generous Fork in the Road with VERA. While news is reporting not many have taken it yet, anecdotally, it seems like a lot will jump on it. For my agency, the VERA (early retirement) was just announced this week and information is being released now. I suspect that played out at other agencies, too.
Don’t get me wrong, there are plenty of games that can be played to drive people out, but the layoff option above is not one of them.
Musk does not have the power to do that. The courts will stop him.
We’re still paying them… scare tactics are expensive and the mandated work is still there…
Corporate reorgnizations or mergers everyone has to reapply for jobs and not just “their own” job up to 5 different jobs. Then offer targeted buyouts and watch the fun begin. All part of real business. All exempt employees have zero protection. Tick tock federal severance expires 2-6-2025.
If you are found improperly documenting hours worked or spending then you are GONE.
Trump team has been working hard the last 4 years with actions plans ready to implement.
Bribem clowns provided a view of D party criminal cartel.
The current hearings for new Trump appointments make D party look more incompetent and just stupid. Liz, Chuck and other D senators have killed D party for the next 100 years.
The emergence of Elon Musk, making mockery of the concept of America
Just FYI
From NYT:
Democrats were buoyed on Monday by a new report from the Congressional Research Service, which determined that Mr. Trump did not have the authority to order structural changes to the agency without congressional approval.
“Because Congress established U.S.A.I.D. as an independent establishment (defined in 5 U.S.C. 104) within the executive branch, the president does not have the authority to abolish it,” the report states. “Congressional authorization would be required to abolish, move or consolidate U.S.A.I.D.”
All this stuff is just for headlines, it’s illegal and will be stopped and reversed. What a waste of the little time you have left in this world …
Maybe take a walk, smell the fresh air, think about your grandkids. Oh no? You want to hate till your dying breath… ok
Problem with the JOLTS is all the phantom positions that don’t exist and multiple entries of the same job posting across state lines. If we removed this glitch in the system we’d see probably .5 openings for every 1 unemployed or somewhere right around there. And don’t even get me started with the archaic BLS figures that come out each month.
Ignorant BS. RTGDFA. What does it say in the article?
It’s “based on surveys of about 21,000 work locations, and not on online job listings.”
DOGE makes for good headlines but a lot of these folks are either union or management organization protected… it’ll be playing out in the courts for a while.
There are well over a dozen wildly illegal things this administration has done in their first two weeks, which taken together create a constitutional crisis. How it all plays out is anybody’s guess.
@Slick I agree this will be in the courts for a while but I think we will all be better off just paying most Government employeees to stay home rather than letting them “work” (a couple houed a day from home) spending our tax money and thinking of new things to tax and regulate.
If work isn’t happening at home, why would it happen in the office? Productively and quality can be measured. If it is not, that is a management issue that needs to be addressed, not a location issue of the employee.
Well said. I’m a state employee working a hybrid schedule and I’m tired of the automatic assumption of lessened productivity.
If management is doing their job (and I don’t hear any evidence they’re not), then the federal employees are doing theirs as well.
So, it’s a bit of a stretch to just assume everyone working from home is just sitting on the couch all day eating bomb bombs.
in my experience, most government employees aren’t doing much work whether they’re in office or not.
why would they? there are no consequences to screwing up
Management is at will employment never protected.
Every day is mundane historic, financial heights never before attained, boldly advancing
I’m just suggesting that the asking price for over priced assets is likely to fall, eventually.
– Mr. Market agrees that there will no rate cuts but also no rate hikes.
I currently think that the Fed is caught between a hard place and a rock. The world turns around every day,
I agree with the Fed decision to hold pat. The fire works are yet too come.
I was talking to a friend who runs a temporary staffing business and they explained how the industry is faring really poorly. This is also evident from the reported results of large temp staffing companies such as Kelly Services, True Blue etc. Healthcare staffing is also another example where there has been massive hiring cuts.
At the same time there are a large number of open positions. Likely that the pandemic disrupted the labor market significantly. People seem to be where there aren’t job and jobs seem to be where there aren’t people or there is a skill mismatch.
Likely going to keep putting upward pressure on inflation.
Wolf is there a source to find data on job data by sector?
Yes, the JOLTS data is by sector.
Just before I left the government to retire we were forced to work in the office 40 hours/week plus 20 hours per week at home. When I told my boss this was illegal, to work 60 hours/week for 40 hours pay he told me that everyone else was working 60 hours and called the extra hours “casual overtime”. He said if I didn’t take the training on my own time, on my own computer, using my own Internet, I would get an UNSAT performance appraisal. He meant business. I told these b$stards to go f$ck off and retired with full benefits. How things have changed. Now we have many federal workers , 4 years after the pandemic ended, doing absolutely nothing and working another job on their laptops and drawing two salaries.
I think that the best architecture of life, is blessed chaos.
I see you are still using information sources that take advantage of you and make you look silly.
Do better. You are ruining the country by lapping up misinformation.
One wise man has this opinion: .. .. ” You may have seen that the statutory debt limit was reinstated on January 2, 2025, at $36.1 trillion. One of Bessent’s first acts as Treasury Secretary, assuming he gets confirmed, will be to suspend debt issuances and to take extraordinary measures to shuffle money between accounts without breaching the debt limit. Once Bessent gets past the politics of the debt limit he will face a relentless wave of nearly $3 trillion in debt that’s expected to mature in 2025. This is on top of the likely $2 trillion deficit. All this debt will need to be financed at interest rates that are much higher than just several years ago. This will further blow out Washington’s budget (and will likely trigger a credit crisis and panic liquidation). That’s when the Fed will crank up the printing press. Before it’s over, the Fed’s balance sheet will push upwards of $15 trillion. The dollar, in return, will be the sacrificial lamb…as will Bessent, as he’s run through the meat grinder.”
DM: America’s biggest employer to cut hundreds of job and close major office as part of new strategy
Walmart, America’s largest private employer sent a memo to staff members Tuesday saying it is planning to cut hundreds of jobs and close its North Carolina offices.
It’s funny: An employer with 2,100,000 employees relocates some people from small offices (to close those offices) to its headquarter in Bentonville, Arkansas, and to its hub in California for greater efficiency and team work, and lays off a few hundred people in the process, while hiring many others in other locations, and it’s like global news of the collapse of the labor market? Clickbait stupid headlines really work! People click on this shit and spread this shit. That’s why clickbait exists.
Somehow having a Fed that can be “spooked” (Wolf’s word) does not inspire much confidence. No wonder the Treasury bond market (20 year) is approaching a 5% yield. The Fed has lost all credibility. I watch Jerry “Mr. Deadhead” Powell’s press conferences more for amusement than edification. He is actually pretty funny, even though he does not mean to be.
As if a 5% yield is punitive. Risk is about to make it’s debut, again, when the excess bank reserves collecting interest in the Fed’s digital vault aren’t pledged as collateral for an anti-social scheme.