Immaculate Disinflation Lives In Favorable JOLTS

There were more than half a million fewer US job openings on the final business day of October versus the prior month, the first of this week’s key labor market data showed.

The decline, which was far larger than economists expected, looked all the more pronounced given a downward revision to September’s headline JOLTS print.

At “just” 8.733 million, the total number of vacancies across the world’s largest economy was the lowest since March of 2021. Consensus expected 9.3 million from the headline. The actual print was below every estimate.

Hires were mostly unchanged. The gap narrowed to 2.85 million, the smallest since early 2021.

October’s figures suggest total vacancies fell by 2.5 million in the first 10 months of 2023. The unemployment rate rose 0.5% over the same period.

The data was a boon to the “immaculate disinflation” narrative and builds on last month’s run of softer data which emboldened rate cut bets for 2024.

Remember: This was always about vacancies.

I don’t want to overstate the case (or come across as unduly optimistic on soft landing odds), but those who suggested labor market normalization couldn’t be “outsourced” to the JOLTS headline were just plain wrong.

I’ll recycle some language from last month’s JOLTS coverage. America’s millions of potentially superfluous job openings were to labor market normalization what the Fed’s bloated RRP facility was to Treasury’s cash rebuild: Just as the market needed RRP balances to absorb bill issuance in order to avoid reserve drain, the economy needed job openings to “absorb” labor market normalization to avoid layoffs. So far, that’s worked out pretty well.

Quits were still elevated in October at 3.628 million, with the rate unchanged at 2.3.

Quits really need to come down a bit further. Elevated quits are evidence of “churn” and churn suggests workers are still confident in their capacity to find a new (and likely better-paying) position if they quit their current job. That’s inflationary on the margins.

Tuesday’s data showed layoffs loitered near record lows in data going back more than two decades.

All anyone will care about is the headline openings print and the extent to which it signaled the “immaculate disinflation” narrative is alive and, I dare say, well. The openings to unemployed ratio, which the Fed watches closely, dropped to 1.34, the lowest since August of 2021.


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10 thoughts on “Immaculate Disinflation Lives In Favorable JOLTS

  1. I’d love to see some sort of white collar vs. blue collar split on this data if any of the smart folks here have that. I suspect blue collar employment is holding up well, but white collar employment, especially in tech, is nearing it’s Wile E. Coyote moment.

  2. @dayjob, I don’t think tech will have a Wile E. Coyote moment. Sure, its trimming the fat, but AI is going to create more jobs, not less. There’s a large amount of investment going on in this space.

    1. Uh, isn’t that contrary to the whole point of AI, through the eyes of businesses, the ultimate consumers of AI? Eventually AI has to pay its own way, just like a robot. Otherwise, why spend the money?

      1. AI isn’t just for reducing jobs by cutting them out. I’m a coder. A middling coder, not a great one, not a lousy one. A great coder is ~10x faster than a middling one, and can handle more complex concepts and requests. AI is helping me dramatically improve my coding, it’s kinda like having another middling coder next to me, but one that has a lot of experience that I can ask questions all day. I’m faster now with my new co-worker, maybe 2x-3x faster on most days, and I’m handling more varied and complex concepts. I’m not great yet, but I’ve got a great new helper.

        1. So, your management will need fewer coders going forward. Beware the next round of “right-sizing” at your firm.

          Stepping back, coding DOES appear to be a sector that is actually being impacted by AI. And I’ve noticed that that corner of the tech world is responsible for much of the market enthusiasm about it. Six months ago I spoke with a fund manager who was rabidly bullish on AI. He told me “Every person we talk to at every tech firm is gung-ho about it.” (Or something to that effect.) You also may notice where so many of the recent layoffs have been.

          Can’t argue with that but to extrapolate that to every industry and every company will prove to be a mistake.

          1. Similar to Btfl’s use case, we’ll see the same thing on the sales side of tech. It’s not that Sales will completely go away, but it’ll increase the capacity of your reps which will create major efficiency gains, especially since companies will keep their best reps who suddenly all have their own assistant.

            And yes, if you are in tech, you will need to stay ahead of the curve because right-sizing will be coming in a big way and there will be a lot of long-term unemployed as a result. It’ll have much larger implications in other industries over the next few years. Blue collar jobs will be less impacted because AI can’t fix your house (but it might help you fix it yourself).

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