On December 9, the U.S. Labor Department released the latest JOLTS report showing a slight increase in job openings to 7.670 million in October, up from a robust rise in September. Meanwhile, slower hiring, a modest increase in layoffs, and the lowest quits rate since August 2020 highlight growing uncertainty in the labor market. These dynamics are unfolding as the Federal Reserve convenes for a two-day meeting, with markets anticipating a rate cut to support economic conditions.

Labor Market Softens Despite Elevated Job Openings

After a surge of 431,000 vacancies in September, October’s job openings rose by only 12,000, with total openings reaching 7.670 million. Most of the October gains occurred in the trade, transportation, and utilities sector, notably retail, which added 239,000 vacancies. Conversely, the professional and business services sector trimmed 114,000 openings, accommodation and food services lost 33,000, and the federal government reduced its vacancies by 25,000. The job openings rate held steady at 4.6%.

Despite stable openings, hiring weakened significantly, falling by 218,000 to 5.149 million. The decline affected construction, professional and business services, healthcare and social assistance, and accommodation and food services. Correspondingly, the hires rate dropped to 3.2% from 3.4% in September. Layoffs edged up by 73,000, concentrated in accommodation and food services, pushing the layoffs rate from 1.1% to 1.2%.

Worker Quits Fall to Lowest Level Since 2020, Signaling Cooling Wage Pressure

The number of workers quitting jobs sank by 187,000 to 2.941 million, marking the lowest monthly total since August 2020. The quits rate fell to 1.8%, down from 2.0% in September and near the lowest point since the pandemic’s onset. This decline reflects weakening labor market confidence and suggests reduced wage growth, which may limit consumer spending.

James Knightley, ING’s chief international economist, explained that such a “cold” quits rate historically correlates with year-over-year wage gains around 2.5%. Given the U.S. economy’s heavy reliance on labor costs—especially in the service sector—this trend points toward easing medium- to long-term inflation.

Market Response and Federal Reserve Policy Outlook

The JOLTS report was released as the Federal Reserve commenced a critical two-day meeting. Central bankers are widely expected to reduce the benchmark interest rate by 25 basis points to a target range of 3.50%-3.75%. This would be the third cut this year, aimed at addressing growing concerns over labor market softness despite inflation remaining above the Fed’s 2% goal.

Market reactions were mixed; U.S. stocks showed uneven performance, the dollar gained against major currencies, and Treasury yields mostly rose following the data. Economist Oren Klachkin of Nationwide described the labor market as “not collapsing but losing steam,” highlighting the Fed’s rationale for further easing.

Labor: Market Outlook

The combined data from September and October suggest the U.S. labor market is in a cautious “no-hire, no-fire” state. Factors such as reduced immigration flows and increased automation are dampening both labor supply and demand. The unemployment rate rose to 4.4% in September, a four-year high, though October’s household employment data was unavailable due to the extended federal government shutdown.

Investors and policymakers will closely watch the delayed November employment report, which includes October’s nonfarm payroll figures, for clearer signals on labor market trends. For now, elevated job openings coexist with subdued hiring and minimal worker turnover, reflecting labor market uncertainty that is shaping inflation and economic growth prospects.