Commentary Directory

JOLTS: February 2024

Jacob Hess
April 02, 2024

As a prelude to the all-important non-farm payrolls data release later this week, the Job Openings and Labor Turnover Report (JOLTS) provides an update of the tightness of the labor market in the second month of the year. The headline job openings number was reported at 8.76 million in February, up only about 10,000 from the January number. The slight gain meant that openings beat consensus expectations of 8.73 million. Hires and separations both increased by roughly the same amount and the former still leads the latter by about 250,000. The industry detail shows that the growth in job openings came from three areas: finance and insurance (+126k), arts, entertainment & recreation (+23k), and state & local government (+76k). The finance and insurance industry notably saw an increase in its job opening rate of 1.7 ppts to 6.8% in February which is a significant increase from 4.4% a year ago. Outside of these industries, there are plenty areas that are seeing openings fall away. Information (-85k), trade, transportation & utilities (-65k) and manufacturing (-13k) are some of the industries that are seeing labor demand cool.

Alongside an increase in job openings, the JOLTS data showed that the level of quits increased by about 40,000 to 3.48 million, the highest level since November 2023. Despite the increase in total quits, the quits rate has been flat at 2.2% for the last four months and is down from the peak of 3.0% in April 2022. There weren't any major trends in quitting across industries. Financial activities (+23k) and professional & business services (+42) were two of the industries with the largest increase in quits which makes sense since openings are still elevated in those service sector industries. The quits data suggests that workers are feeling less secure in their employment situation than two years ago when jobs were much more plentiful. However, that doesn't necessarily point to a loose labor market in general just one that is looser than the extremely tight post-COVID labor market. The quits rate is still trending around pre-pandemic levels when the economy was at full employment in 2018-2019.

The more telling indicator of labor market, total job openings vs the total number of unemployed, is pointing to a stubbornly slow slackening in employment demand. The openings-unemployed ratio is still lingering around 1.4x with the newest reading at 1.36x in February. This is the second lowest since August 2021, but also still above the pre-pandemic 2019 average of about 1.2x. Basically, we are still looking at pockets of labor shortages in areas of the economy (like finance & insurance and other services industries), but most industries are probably back to pre-pandemic levels which, admittedly, were still relatively tight. I expect job openings to continue to fall through 2024 as higher interest rates continue to work through the economy. But for now, the Fed must settle for a gradual easing in hiring as the aggregate level of demand in the US economy is just too strong.