Job Openings Hold Steady as Labor Market Normalizes From Pandemic Disruptions

The number of job openings held steady at the end of November, suggesting a labor market that has returned closer to normal after nearly four years of dislocation from the COVID-19 pandemic, the Labor Department reported on Wednesday.

The number was slightly above the prior month’s 8.7 million but in line with a slowing demand from the frenzied pace of the past two years that saw job openings reach 12 million in early 2022. Although economists tend not to put too much stock in one month of job openings data, the report does serve as a measure of how much slack there is in the labor market and in particular sectors of the economy.

Openings decreased in transportation, warehousing and utilities, down by 128,000, and in the federal government, where the decline was 58,000. Openings increased in wholesale trade, up by 63,000.

Overall hiring fell by 363,000, with a decline in the professional and business services category of 163,000.

The report is the first of a group measuring the health of the job market to be released this week. On Thursday, private payroll firm ADP will issue its monthly survey of employers for December, and Friday closes the week with the government’s monthly report on nonfarm payrolls. That is expected to show around 170,000 jobs were created last month, down from the 199,000 of November.

“We expect the year will end on a strong note with a solid payroll gain of 185k with private sector job growth picking up to 175K and government employment cooling with ‘only’ a 10K job gain,” said Gregory Daco, EY chief economist. “As such, the economy will have added 2.74 million jobs in 2023, or the equivalent of nearly 230K jobs per month, which represents the strongest annual job gain since 2015, outside of the pandemic shock. This would also represent nearly 40% stronger job growth than in 2019!”

Julia Pollak, chief economist at online job search site ZipRecruiter, says, “Online job posting data shows a noticeable decline” and that she expects the trend to continue in the first quarter.

“In the last six months, 98% of the job gains have come in three sectors, health care, leisure and hospitality and government,” Pollak adds.

That reflects changing circumstances in the economy.

“There are interest-rate sensitive industries and those that are relatively immune” to higher borrowing costs. “People are traveling a lot, going to concerts and sporting events.”

Later Wednesday, the Federal Reserve will release the minutes of its December meeting at which it held interest rates steady and Chairman Jerome Powell followed with a press conference that was notable for his “dovish” stance on further rate hikes. Markets have since priced in a handful of rate cuts this year.

The minutes could give some insight into what led Powell to be so positive about the downward trend of inflation as well as show whether his position was consistent with that of other Fed officials.

“The job market is cooling as illustrated by fewer openings,” said Jeffrey Roach, chief economist at LPL Financial. “We should see confirmation of that in this Friday’s jobs report. Important metrics to track this coming Friday include the flow of individuals entering the labor force and the ratio of part-time workers to full timers. The Fed is likely in a sweet spot as they prepare markets for an upcoming cut in rates.”