JOLTS Data and Strategists: Unraveling the US Labor Market's Resilience

This week's Job Openings and Labor Turnover Survey (JOLTS) data, coupled with strategists' insights, paints a nuanced picture of the US labor market's resilience and cooling. Job openings declined to 7.4 million in September, down from 7.9 million in August, indicating a slowdown from the post-pandemic peak but still above pre-pandemic levels. Hiring activity also eased, with hires dropping to 5.56 million from 5.73 million, while layoffs rose slightly to 1.83 million. The quits rate, a key gauge of worker confidence, fell to 1.9%, the lowest since 2015. Strategists like Eugenio Aleman of Raymond James and Elizabeth Renter of NerdWallet note this normalization, but warn of potential choppy data ahead due to the Boeing strike and hurricanes.

The JOLTS report shows key metrics indicating a cooling labor market. The number of job openings fell to 7.4 million in September, down from 7.86 million in August. This decline reflects a normalization of the labor market, with openings as a percentage of total employment mirroring pre-pandemic levels. Additionally, hiring rates, quits, and layoffs show a decrease, suggesting a less dynamic labor market compared to a year ago.



The latest JOLTS data shows a cooling labor market, with hiring rates (5.34 million) and quits rates (2.1%) at pandemic lows. Layoffs, however, remain low (1.498 million). This signals a cautious market, but not a downturn. Historically, hiring and quits rates were higher during the 2018-2019 expansion. The current labor market's resilience suggests a balanced portfolio, combining growth (tech) and value (energy) stocks is prudent.

Job openings and the job openings-to-unemployment ratio are powerful indicators of broader economic conditions. According to JOLTS data, job openings have been declining, with 7.4 million unfilled positions in September, reflecting a labor market normalization towards pre-pandemic levels. This trend mirrors the cooling of the labor market, with hiring and quits rates decreasing, and layoffs remaining stable. The job openings-to-unemployment ratio, at 1.22, signals a balanced labor market, indicating that job growth remains solid but has lost momentum. Strategists interpret this as a sign of a maturing economic recovery, with the potential for continued growth if employers' demand for workers doesn't tumble too far.

The decline in job openings has an impact on hiring and wage growth. The recent JOLTS data reveals a decrease in job openings, with employers posting 7.4 million openings in September, down from August's 7.86 million. This slowdown in job openings indicates a cooling labor market, as the rate of openings as a percentage of total employment mirrors pre-pandemic levels. While hiring activity has slowed, the total number of hires rose to 5.56 million in September. However, the quits rate, a gauge of employee confidence and future wage growth, dropped to 1.9%, the lowest since the summer of 2015. This suggests that workers are less likely to switch jobs, which may result in slower wage growth.

The decline in hires rates affects employee confidence and job security. The decline in hires rates, as indicated by the JOLTS report, signals a cooling labor market and may impact employee confidence and job security. With fewer opportunities for career advancement, employees are less likely to leave their current roles, as reflected by the sluggish quits rate. This prioritization of job security over career growth may lead to lower employee confidence, as Glassdoor's survey suggests. However, the low level of layoffs indicates that employers are being prudent and there is pent-up demand for hiring, suggesting a less serious deterioration in economic conditions. The Fed's interest rate decisions may act as a catalyst for hiring, potentially boosting employee confidence and job security.

The JOLTS report highlights a cooling labor market, with job openings and hires decreasing. Industries most affected include healthcare and social assistance, and government, which have driven recent job growth. Investors can capitalize on this by focusing on resilient sectors like energy, which is currently under-owned, or by maintaining a balanced portfolio with both growth and value stocks. Additionally, strategic acquisitions can drive organic growth, as seen with Salesforce.