The jobs market is starting to show hard-to-ignore cracks
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The labor market that appeared to be entering a more stable phase is now showing hard-to-ignore cracks, with job openings collapsing and early signs of a pickup in layoffs.
Why it matters: It raises the risk that policymakers misjudge whether the labor market is stabilizing or sliding deeper into a slump at a pivotal moment.
Driving the news: The shutdown-delayed Job Openings and Labor Turnover Survey (JOLTS) tells the story: After months of being "little changed," job openings plunged in December, suggesting a drop-off in demand for new workers.
- Job openings fell by 386,000, to 6.5 million in December, bringing the job openings rate to 3.9%, down from the most recent peak of 4.6% just back in September.
- Hiring improved some, but that's not saying much: The hiring rate ticked up to 3.3%, still consistent with the sluggish hiring last seen in the early 2010s, as the economy struggled to recover from the financial crisis.
The big picture: The JOLTS data comes after other indicators pointed to a potential pickup in layoffs in recent weeks.
- New applications for jobless claims rose by the most in two months (+22,000) last week, although that figure could be boosted by snowstorms across the nation that might have put people out of work.
- Challenger, Gray & Christmas also released its regular tally of U.S. job cuts Thursday morning, which showed the most layoffs for the month of January since 2009.
Flashback: The Federal Reserve held off on cutting interest rates last month after three consecutive reductions.
- One reason: Labor market indicators suggested "conditions may be stabilizing after a period of gradual softening," Fed chair Jerome Powell told reporters.
Yes, but: Fed governor Christopher Waller dissented in favor of another quarter-percentage point cut, citing the need to guard against further weakness in the labor market.
- The data Thursday morning shows his concern might be warranted.
- "I have heard in multiple outreach meetings of planned layoffs in 2026," Waller said last week in a statement explaining his dissent.
- "This indicates to me that there is considerable doubt about future employment growth and suggests that a substantial deterioration in the labor market is a significant risk."
The other side: It isn't all bad news. The Bank of America Institute's labor market report, based on its customers' deposit data, showed improvement in the labor market last month.
- This data shows that the number of households receiving unemployment benefits dropped last month, while customer accounts receiving a paycheck suggest a rebound in jobs growth.
- "Overall, the impression is of a stabilizing, and possibly re-accelerating, labor market," the bank said in a release.
The bottom line: America's angst about the labor market is at multidecade highs. A big picture look at the economic data — including indicators released Thursday — explains why.
- There is fewer than one open job (0.9) for every unemployed worker as of December. That's a big turnaround from just four years ago, when there was a peak of two open jobs for every available worker.
