The news:
The number of job vacancies fell significantly in October, reaching the lowest level since March 2021, the Labor Department said on Tuesday.
There were 8.7 million job vacancies in October, a significant decrease from 9.3 million in September. according to the Job Vacancies and Workforce Turnover Survey. That was less than economists' expectations of 9.3 million openings.
The layoff rate has changed little, as has the quit rate, which generally reflects workers' confidence in their ability to find new employment.
Why it matters: The state of the labor market influences interest rate policy.
The labor market is being closely watched by the Federal Reserve as it considers its interest rate policy. A cooling labor market tends to fuel forecasts that the Fed will not raise interest rates further, which have risen to a range of 5.25 percent to 5.5 percent from near zero in March 2022.
The labor market has been surprisingly resilient since the Fed began raising interest rates as part of a campaign to curb inflation. But while the labor market is showing signs of slowing, consumer spending has also increased. Many companies told investors that customers pulled back last quarter, spending less on products and more on services and experiences. The Fed's preferred measure of inflation confirmed that consumer spending slowed in October.
At the same time, investors are increasingly confident that the Fed can handle the rate hike. Federal Reserve Chairman Jerome H. Powell indicated in a recent speech that the central bank would keep interest rates steady if data continued to point to a slowing economy.
Background: Unemployment and job vacancies have returned to previous levels.
Although the labor market is slowing, the situation for workers remains healthy. The unemployment rate rose to nearly 4 percent in October, matching pre-pandemic levels.
The number of job vacancies reached a record high of over 12 million in March 2022 and has been declining since then. The last time the number of job vacancies was around nine million – where it currently is – was in spring 2021.
Although inflation has slowed significantly since the Fed began raising interest rates in March 2022, it is still above the central bank's 2 percent target.
The Fed's preferred measure of inflation fell to 3 percent in October from a year earlier. But excluding food and fuel prices, which are volatile and less sensitive to Fed policy actions, the rate was 3.5 percent.
What's next: The November jobs report comes out on Friday.
The November jobs report will be released by the Labor Department on Friday. Economists predict that the unemployment rate will remain at around 4 percent and around 180,000 jobs will be created.
This report will be one of the last glimpses into the state of the labor market before the Fed's next policy meeting on December 12th and 13th.
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