According to data released Tuesday by the Bureau of Labor Statistics, the October Job Openings and Labor Turnover Survey (JOLTS) report came in at its lowest level in more than two years. This has fueled speculation that the Federal Reserve’s so-called “soft landing” scenario might be actively devolving into a “hard landing.”
So, what do you need to know about this latest startling jobs report?
Well, job openings fell to 8.73 million in October, down 6.6%, and markedly below the 9.4 million Dow Jones estimate. This has led to a decline in the ratio of openings to available workers to about 1.3 jobs available for every unemployed person, from 2 to 1 just months ago. For context, 1.3 is close to the pre-pandemic ratio of 1.2 to 1.
The largest sector declines were in education and health services, which lost 238,000 jobs, and financial activities, which shed 217,000.
The report has indicated that the labor market may finally be feeling the impact of the Federal Reserve’s quantitative tightening process.
“Now we’re starting to head back to levels that are truly consistent with what you would call a cooling labor market,” Karin Kimbrough, chief economist with online job site LinkedIn, told CNN.
JOLTS Report Hints at Possible “Hard Landing”
Amid its most aggressive rate hike cycle in decades, the Fed has been closely watching certain economic indicators — namely jobs and consumer spending — to understand just how far the central bank would be able to toe the line before incurring a potential recession.
With Fed policy still up in the air heading into 2024, today’s report should strengthen the case for a potential rate cut.
“This data certainly solidifies the Fed’s decision to keep rates unchanged while looking for signs of a pivot in the upcoming meeting next week,” said Tuan Nguyen, U.S. Economist at RSM. “Besides inflation, job opening data, serving as a proxy for labor demand and wage pressure, has been the Fed’s top priority in recent times.”
In recent months, it has seemed like the Fed may manage to pull off a “soft landing,” a Goldilocks scenario where inflation lowers to around 2% without devastating the labor market and spending.
Reasonably so, unemployment has held strong, under 4%, while consumer spending just experienced its strongest October since 2010. All the while, inflation has slowly but surely returned to acceptable levels. Last week’s Personal Consumption Expenditures (PCE) report showed inflation at just 3% annually, nearly unchanged from September to October.
With the November jobs report due this Friday, today’s news may be an early indicator that the once-tight labor market is starting to show cracks.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
