High-profile economists were engaged in a nerdy yet hugely consequential debate last summer: Might inflation come down without a massive spike in joblessness — perhaps simply through employers cutting back on job openings?

What's new: We have a winner in the debate, further confirmed by new data out this morning that showed the number of job vacancies plunging in October.

• That drop in job openings has not been accompanied by widespread layoffs — an outcome few traditional economic models would predict. In October, for instance, layoffs changed little from the prior month.
• The number of job openings fell by 617,000, while the number of people employers hired was little changed — and layoffs remained low.

Why it matters: The U.S. labor market is rebalancing from pandemic-era extremes with minimal pain for workers, while inflation edges closer to the Fed's 2% target.

• Employer demand for new workers is easing, even as firms still, for the most part, retain existing staff.

By the numbers: In October, there were 8.7 million job openings — the lowest since March 2021 and far below the peak of 12 million in March 2022. That means there were about 1.3 open jobs for each unemployed worker, compared to the 1.2 open jobs before the pandemic.

• Employers have fewer job openings that they can't fill. Evidence that's the case lies in still-healthy hiring: There were 5.9 million hires in October — nearly as many as before the pandemic hit.
• Further signs of rebalancing are clear in the quits rate: It was 2.3% in October, in line with pre-pandemic rates (it had soared as high as 3% in 2022).
• While the Great Resignation craze is over, workers still feel somewhat confident about labor market prospects. Part of the reason might be layoffs remain at historically low levels — there were just 1.6 million in October.

Flashback: Last July, Fed governor Christopher Waller and economist Andrew Figura wrote a paper that now looks prescient. It suggested vacancies could plunge, helping heal the demand-supply mismatch that fueled strong wage growth.

• "We recognize that it would be unprecedented for vacancies to decline by a large amount without the economy falling into recession," Figura and Waller wrote at the time.

The intrigue: So far, that appears to be exactly what happened.

• It was an argument that ran counter to that of famed economist Olivier Blanchard, ex-Treasury Secretary Larry Summers and Alex Domash, who at the time published a paper noting historical episodes in which the unemployment rate "increased substantially" as the vacancy rate came down.

What they're saying: "A decline in openings without a spike in layoffs represents a relatively painless rebalancing between labor supply and labor demand," writes Nick Bunker, head of economic research at Indeed Hiring Lab, in a note.

• He argues that "the current state of the labor market suggests no further recalibration is necessary to bring the labor market back into balance. It's already there."

As the labor market rebalances, the services sector still looks to be chugging along, according to the other half of today's 10am data dump.

Driving the news: The Institute for Supply Management's index of activity at service businesses came in at 52.7% for November, up from 51.8% in October and comfortably above the level of 50% that separates expansion from contraction.

• The employment component of the report was up 0.5 points, consistent with a still-solid job market. Prices were down 0.3 points, suggesting diminishing inflation pressures.
• New orders, a forward-looking indicator, were unchanged.

What they're saying: "A comparably flat month of business activity — no major swings one way or the other," said an unnamed participant in the survey from the wholesale trade industry.

• "Inventories in our extended supply chain look healthy, and fill rates are improving," the purchasing manager said.
• "Solid activity heading into the final stretch of the fourth quarter," said a transportation and warehousing company.