Job Openings Drop Below 8 Million, Signaling Labor Market Slowdown

Job openings fell more than expected in December, declining to their lowest level since September as investors monitor the labor market for signs of cooling. Data from the Bureau of Labor Statistics released Tuesday revealed 7.6 million open positions at the end of the month, down from 8.15 million in November. This represented the largest sequential drop in openings since October 2023.

The November figure was revised up from the initial estimate of 8.01 million open jobs. Economists surveyed by Bloomberg had forecasted Tuesday's report to show 8 million openings.

Nancy Vanden Houten, lead US economist at Oxford Economics, noted that the December data "presents a familiar picture of the labor market, with low layoffs maintaining positive net job growth despite the slower hiring pace."

The Job Openings and Labor Turnover Survey (JOLTS) also indicated 5.46 million hires in December, exceeding the 5.37 million in November. The hiring rate remained unchanged at 3.4% for the third consecutive month.

The quits rate, an indicator of worker confidence, remained at 2% in December, unchanged from the previous month. Both the quits and hiring rates are still below pre-pandemic levels.

In a press conference on January 29th, Fed Chair Jerome Powell characterized the labor market as "broadly stable," citing this in part for the central bank's decision to pause interest rate cuts.

Vanden Houten believes the latest JOLTS report aligns with the Fed's assessment of the labor market. "The JOLTS report supports the Fed's view that the labor market can withstand a more cautious approach to rate cuts, especially given the uncertainty surrounding tariffs," she said. "We are removing a March rate cut from our February baseline forecast."

As of Tuesday morning, markets priced in less than a 50% likelihood of Fed interest rate cuts until its June meeting, according to the CME FedWatch Tool.

This week's labor market data releases culminate with the January jobs report on Friday. Economists anticipate the report to indicate the addition of 170,000 jobs, down from 256,000 in December. The unemployment rate is expected to remain stable at 4.1%.

Investors will closely monitor the January jobs report for further insights into the health of the labor market.