US job openings fell the most in over 4 years by 561,000 to 6.8 million in November, marking the lowest level since February 2018. That’s according to the latest Job Openings and Labor Turnover Survey (JOLTS) – which is one month delayed – out on Friday. This was a pretty unusual move:
- That’s the third largest monthly drop in job openings since the series started in December 2000. The biggest monthly declines happened in August 2015 (down by 630K) and November 2004 (-610K), not during the dotcom bubble or financial crisis like you may expect.
- The average monthly move is +8.5K and the standard deviation is 246K since the start of the series. That means November’s fall of 561K was over two standard deviations away from the average.
- The industries with the most reductions in available positions in November included: construction (down 112K), manufacturing (down 59K), and trade, transportation and utilities (down 246K). Retail trade, included in the last figure, was particularly dinged, down 139K. Of course the US-China trade war may have played a role, and these industries are consistently cited in the Fed’s Beige Book report as experiencing labor shortages from employers struggling to find qualified workers.
The upshot: November’s drop in job openings was unusually large, but it’s also important to remember that this data can be choppy month to month. We’ll keep a close eye on it in future reports, however, given the size of the move.
Moreover, the breakdown in job openings is a good example of why we review less traditional economic datasets, such as JOLTS. If you just paid attention to the standard Employment Situation Report, it showed nonfarm payrolls rose by 256,000 last November. Clearly, the picture was not as a rosy as that print suggested.
With that, let’s delve deeper into the latest edition of JOLTS. While most people just look at the levels of each data point in the report, we always adjust it for the size of the US labor force so we can compare current data to prior cycles. Here are our key takeaways:
#1: Job Openings as a percentage of the labor force fell to 4.14% in November 2019 compared to the record high of 4.68% in November 2018. The rate of job openings as a percentage of the labor force still exceeds levels reached in the last two economic cycles, but has been rolling over since 2018.
- In the last cycle, the number of job openings as a percentage of the labor force oscillated around the 3.0% threshold until the US stock market’s peak in October 2007 before falling to a low of 1.47% in July 2009.
- In the current cycle, this percentage continues to run closer to the 4% threshold, a red flag if breached. November’s large fall in job openings got it much closer, which gives us some concern given that it is an early indicator of trouble in the labor market since employers typically withdraw job listings before they start laying off workers.
#2: Hires as a percentage of the labor force edged up to 3.54% in November versus the post-recession high of 3.69% in April 2019.
- The current rate remains around levels reached in the last cycle, but below the high of 3.68% in July 2006.
- In the prior cycle, hires as a percentage of the workforce hovered around 3.5% until turning lower when the market peaked in the fall of 2007.
- While job openings reflect employer interest in hiring, actually doing so shows US business confidence remains healthy.
#3: Quits as a percentage of the workforce rose slightly to 2.15% in November compared to the post-recession high of 2.25% in July 2019.
- Quits as a percentage of the labor force still bests the high of 2.03% in September 2005 during the last cycle, which occurred long before the market’s peak in October 2007.
- Looking ahead, quits as a percentage of the labor force in the last cycle chopped around the 2% threshold until turning lower during the fall of 2007 when the market topped out. The number to watch here: dropping below 2% like in the last cycle.
- This is an especially important data point since workers do not tend to voluntarily leave their job unless they have already secured a higher paying/better position. That’s why it was former Fed Chair Janet Yellen’s reportedly favorite measure of the US labor market because it reflects economic confidence.
#4: Layoffs and discharges as a percentage of the labor force fell to 1.06% as of November, very near the current cycle low of 1.00% in September 2016. In the prior cycle, it bottomed at 1.16% in December 2006 and reached a high of 1.72% in April 2009.
#5: Our “Take This Job and Shove It” indicator, or quits to total separations, rose to 62.6% in November compared to the record high of 63.1% in July 2019. This was due to an increase in quits and a fall in layoffs and discharges, an ideal combination.
In sum, US workers remain confident and employers are hiring, but the unusually large decline in job openings shows the US labor market may be slowing. Additionally, even with such a big move in job openings to the downside, they have outnumbered unemployed workers for 21 straight months. Prior to the beginning of 2018, unemployed workers always exceeded job openings since the start of the series in December 2000. As of November, job openings still outnumbered unemployed workers by nearly 1 million. This disparity highlights employers’ ongoing difficulty of finding qualified workers. Perhaps they have started to give up…