The August JOLTS Report Points to Continued Labor Market Resilience

The August JOLTS Report Points to Continued Labor Market Resilience

High interest rates have cooled the labor market by causing job openings and quits to normalize, rather than destroying jobs

The labor market remains resilient and continues its graceful normalization, according to today’s JOLTS report. Although job openings are clearly trending downwards, they jumped to 9.6 million in August—likely the result of statistical noise rather than a meaningful improvement in labor market conditions. At the same time, other key JOLTS indicators remained largely unchanged and consistent with their pre-pandemic levels, suggesting labor market stability. 

The overall picture painted by the JOLTS report is that the labor market has largely returned to its pre-pandemic state, but with substantially fewer layoffs and far more job openings. As of August, there were just 2% fewer monthly hires and 4% more quits than in February of 2020, but 15% fewer layoffs and discharges, and 37% more job openings. 

Perhaps surprisingly, the JOLTS report suggests that labor market conditions in manufacturing have become tighter, not slacker, since the onset of the pandemic. There were 13% more hires and 19% more quits in manufacturing in August than in February of 2020 before the pandemic. Manufacturing, a highly capital-intensive and interest-rate sensitive industry, typically loses jobs and sees labor markets slacken when the Federal Reserve raises interest rates. But that does not appear to have occurred. Instead, employment levels in the industry have been flat all year, and labor markets remain tight. 

While construction has seen a decline in monthly hires, job openings and quits remain well above their typical pre-pandemic levels—evidence that yet another interest-rate sensitive industry continues to defy expectations and shrug off higher rates. 

Interest rate hikes typically cause the unemployment rate to rise and the employment level to fall, particularly in manufacturing and construction. This rate hike cycle has been notably different so far. Because the Fed began raising rates at a time of considerable excess demand for labor, higher rates have cooled the labor market by cutting job openings, not jobs. Job openings have now fallen 20% from their peak of 12 million reached in March of 2022, even as employment levels have grown.

While the labor market overall was roughly back to normal, the August JOLTS did break two records—for the highest number of quits in arts and entertainment, likely the result of the recent Hollywood writers’ strike, and for record-high tech retirements (known as “other separations” in the report), likely the effect of the lingering tech-cession.