The latest JOLTS report suggests that the US labor market is beginning to chill

The US labor market seems to have chilled a little bit in January, but it is still too hot for the Federal Reserve’s liking.

The monthly Job Openings and Labor Turnover Survey, or JOLTS report, by the Bureau of Labor Statistics, revealed on Wednesday that the number of job openings in the US decreased to 10.8 million in January. This is a sharp decline from the upwardly revised 11.23 million jobs in December last year. Economists expected 10.5 million jobs to be created in January, and it seems that they were close to the mark.

Hiring increased in January from 6.25 million to 6.37 million. At the same time, layoffs increased from 1.48 million to 1.72 million. Americans seem to be less willing to quit their jobs this year, as indicated by a drop in quits from 4.09 million to 3.89 million in January.

All of these factors point to a cooling labor market for the US. The gap between the demand for labor and the worker supply ensured that the job market was tight through January, which was not what the Federal Reserve wanted to cool the economy.

Although the data portrayed in the January JOLTS report indicated that the number of available jobs is heading in the direction the Fed wants, it is still far too small a change to convince the economy that labor market conditions are cooling enough. The Fed will base its next actions on the data presented by the JOLTS report, as it usually indicates the labor market demand well. Over and over, the Fed has warned America that a tight labor market has the potential to maintain upward pressure on wages and, as a result, inflation.

The decreasing number of quits shows us how the employee sentiment has shifted regarding their bargaining power in the labor market. In January, there were almost 1.9 jobs available for every job seeker on the job hunt.

We cannot ignore the discrepancies between the JOLTS data and online jobs data. According to JOLTS data, job openings have decreased by 10% since a record high of 12.03 million in March 2022. However, online job postings and private sector survey data show us a far more significant decline. Julia Pollak, the chief economist with ZipRecruiter, says that JOLTS data will at some point start seeing what they observed in online job postings. Online job postings have decreased by 28% since the Fed began large interest rate hikes in June last year.

Although the number of online job postings has declined, the figure remains 16% above the pre-pandemic levels. The JOLTS data regarding layoffs indicate how there is a slowdown in the labor market. The estimated 1.72 million layoffs in January are well above the average 1.44 million.