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Labor Demand Shows Signs of Mild Cooling. It’s What the Fed Wants to See.

Employees are posting fewer jobs and hiring fewer people, and more employees are staying in their current positions.

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Spencer Platt/Getty Images

The demand for workers that had been running white-hot for much of the past year is now starting to cool off, offering the latest sign that the labor market is moving back toward normal.

Job openings fell in October to 10.3 million, new Labor Department data showed on Wednesday, bringing them back to roughly the level where they stood in August. That marks a significant drop both from the peak in March, when job openings reached nearly 11.9 million, and from September, when available positions had unexpectedly jumped to 10.7 million.

Both the number of workers quitting their jobs and the number of new hires also declined in October, the new data show. And the number of layoffs and discharges remained little changed despite anecdotal reports of widespread job cuts, particularly in the tech sector.

Overall, the October data show that labor demand is trending down, as employers post fewer jobs and hire fewer people, and more employees stay put at their jobs. That’s a good sign for the Federal Reserve, both because the bank wants to see the labor market loosen up to reduce upward pressure on wages, and because it indicates that the rapid pace of monetary-policy tightening is having an effect.

“Everything changed little, but it was in the right direction,” says Bledi Taska, chief economist with Lightcast, a labor market analytics firm. “The signals we are getting is that for the moment, everything seems to be going according to the Fed’s plan.”

Still, given that labor demand has been at historically high levels for much of the pandemic, the latest tentative softening leaves the job market far tighter than the Fed would like to see. There was nothing in the October data to suggest to policy makers that they need to rein in their fight against inflation to minimize the impact on employment.

Labor demand, in other words, “has started to wilt but is a long way from falling off the vine,” wrote
Wells Fargo
economists Sarah House and Michael Pugliese.

Take the ratio of jobs open to unemployed workers as an example. The statistic is often cited by Fed Chairman Jerome Powell, and it has been steadily falling since April, landing at 1.7 in October, the data show. That’s a drop from a peak of roughly two jobs available per unemployed worker, but the ratio remains well above its 2019 average of 1.2, noted Nick Bunker, head of economic research with the Indeed Hiring Lab.

“Rumors of the labor market’s demise have been greatly exaggerated,” Bunker wrote on Wednesday. “The outlook for next year is still hazy with an aggressive Federal Reserve willing to raise unemployment to bring inflation down. But as we head to the end of 2022, the U.S. labor market remains resilient.”

Write to Megan Cassella at


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