The Fed caught a rare break ahead of the May FOMC decision when the BLS’s JOLTS report showed job openings slipped to a three-year low at “just” 8.488 million as of the last business day of March.
That was fewer than expected and down 325,000 from the prior month’s revised level. It counted as the largest month-to-month decline since October.
Hires, meanwhile, fell the most since February of 2023, leaving the gap only marginally lower.
At the margins, the main aggregates (openings and hires) are evidence of a cooling labor market, consistent with the Fed’s disinflation goals and, more importantly, with a benign resolution to lingering labor market friction.
Although I certainly wouldn’t want to downplay the significance of incremental soft landing progress, particularly at a critical macro-policy juncture, I do think we’ve reached the point of diminishing returns with this series vis-à-vis near-term policy considerations.
By that I mean JOLTS isn’t as decisive as it once was and progress towards pre-pandemic levels of job openings will probably be halting at best in the absence of a recession, at which point the discussion would quickly become irrelevant (the Fed would be cutting anyway).
All of that said, I’d be remiss not to quickly note that the quit rate, at 2.1%, fell to the lowest since August of 2020.
That rate has now normalized, a welcome development for a Fed concerned about labor market churn and the read-through for wage growth.
Total quits, at 3.3 million, were the lowest since January of 2021, which is to say prior the onset of inflation. The overall separation rate was the lowest since 2014 at 3.3%.
Finally, the ratio of openings to Americans “officially” jobless fell to 1.32, the lowest since August of 2021.
To reiterate, all of that’s good news for the Fed. Unequivocally. But in terms of the near-term (i.e., next six months) outlook for rates, incremental labor market normalization as conveyed by the JOLTS release is outweighed by the persistence of realized inflation.
At the end of the day, the mandate is maximum sustainable employment and price stability, not a “normal” quit rate or a one-to-one openings to jobless ratio.
