Job Openings and Layoffs Normalize as Labor Demand Cools

Job Openings and Layoffs Normalize as Labor Demand Cools

There are still 2.6M more job openings than before the pandemic

Job openings reported today by the U.S. Bureau of Labor Statistics fell approximately 4% in March, following the trend seen in online job postings. Meanwhile, layoffs and discharges rose 16%, nearing pre-pandemic levels. Both shifts show that demand for labor is cooling overall. The March JOLTS report is consistent with other indicators—such as working hours and monthly payroll gains—which have normalized in recent months following two years of unprecedented labor market churn. 

The quits rate ticked back down to 2.5% having peaked at 3.0% last year. It is now almost back to its pre-pandemic rate of 2.3%. The decline suggests that workers are no longer finding as many attractive alternatives to their current jobs. The number of layoffs and discharges rose to 1.8M having bottomed at 1.3M in 2021. It is also back within striking distance of its pre-pandemic average of around 1.9M. 

Key takeaways from the report: 

Small businesses drove the decline in openings. The number of job openings in the private sector declined 4.7% over the month, largely driven by a sharp decline in the number of openings in small businesses with fewer than 50 employees which decreased 8.9%. Tightening credit conditions generally affect small businesses disproportionately, and are likely hindering their ability to invest and grow. The monetary policy drag on small businesses is only likely to get worse in the coming months as regional banks, a major source of lending to small businesses, shore up their capital and reduce small business loans. 

Layoffs jumped in construction. Employment has been remarkably stable in construction in recent months, despite the large slowdown in building applications for new housing and housing starts. Largely, that was because construction projects take so much longer to complete since the pandemic that construction companies had enough of a backlog to maintain headcount levels. It also reflects high levels of apartment construction and of industrial construction, partly funded by the CHIPS Act and Inflation Reduction Act. Today’s JOLTS report suggests that the industry may not be able to avoid job losses for much longer, amid rising interest rates and a housing market slowdown. 

Quits dropped sharply in accommodation and food services. High employee turnover in restaurants has been a major driver of sky-high wage growth in recent months, but that may soon come to an end. The quits rate fell from 6.0% in February to 4.7% in March, largely due to a slowdown in warehouse hiring.

The arts and entertainment industry is still booming. Job openings in arts, entertainment, and recreation reached a new record high as Americans flocked to concerts and baseball games. Service industries that still have an employment shortfall relative to pre-pandemic headcount continue to recover and rebuild as resilient consumer spending propels them higher.