The number of job openings fell in October, an indication that the labor market is slowly starting to feel the effects of the Federal Reserve’s interest rate hikes.
Openings across all sectors declined to 10.3 million in October, down from 10.7 million the month before, according to data released on Wednesday by the Bureau of Labor Statistics.
Still, job openings remain high by historical standards, and other details from Wednesday reports suggested that the labor market is strong. Hires were little changed in October, as were layoffs. The rate of people quitting their jobs was also about the same as the month before.
The largest decreases in job openings were in state and local government excluding education, nondurable goods manufacturing, and federal government.
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Job openings cooling is a bit of good news for the Fed, which has been on an aggressive rate-hiking cycle in order to bring down the country’s towering inflation. High job openings can indicate that the labor market is still robust, and thus the rate hikes haven’t begun to eat into that so much as of yet.
Still, while job openings are going down, they are not falling very quickly and are still higher than the Fed might expect given the rate increases.
“The labor market is not loosening up as much as Fed officials had hoped with over 10 million job openings at the end of October,” said Chris Rupkey, chief economist at FWDBONDS. “There is still a shortage of labor out there in the country, and if it persists, Fed officials will have to brake the economy harder with even more interest rate hikes.”
Fed Chairman Jerome Powell recently said that openings “need” to come down. The Fed has already aggressively hiked rates throughout the year, so Tuesday’s numbers are likely surprising to the central bank and many economists.
“Job openings are incredibly high relative to the number of people looking for work. It’s plausible, I’ll say, that job openings could come down significantly — and they need to — without as much of an increase in unemployment as has happened in earlier historical episodes,” Powell said following the September Federal Open Market Committee meeting.
All eyes are on Friday’s much-anticipated employment report for November. It will be the last jobs report before the Fed meets again next week to decide by what degree to keep raising rates. The labor market has proven resilient despite the tightening, and a bad report could indicate to Fed officials that their action is beginning to bear results.
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Last quarter’s gross domestic product growth was also strong despite the hikes. GDP grew at a 2.9% annual rate in the third quarter after declining in the first half of the year, the Bureau of Economic Analysis reported in an updated estimate on Wednesday.
Despite the strong jobs market and the positive GDP growth, most economists expect the economy to fall into a recession sometime in the next year in reaction to the monetary tightening. The question of how severe a potential recession will be is still up for much debate, though.
