Workers are quitting at the lowest rate since the pandemic as jobs get harder to find

By Jeffry Bartash

Rebound in job openings doesn't alter view of weakening U.S. labor market

The numbers: Workers are quitting at the slowest pace since the pandemic as hiring dries up and jobs become harder to find, reflecting a cooldown in what had once been a red-hot U.S. labor market.

The number of workers who quit jobs in August fell to 3.1 million from 3.2 million in the prior month to mark the lowest level in four years, the government reported Tuesday.

What's more, the percentage of workers quitting slipped to just 1.9% to put it well below prepandemic levels.

The rate at which companies hire, meanwhile, dipped to 3.3%. That's the lowest level in 11 years if the pandemic is set aside.

The big slowdown in hiring helps explain why fewer workers are quitting. Workers are apt to stay in their current job when it becomes harder to get another one.

Weaker hiring and fewer people quitting overshadowed the first increase in U.S. job openings in three months.

Openings rose to 8.0 million in August from a three-and-half year low of 7.7 million in July, the Labor Department said. Still, new openings have fallen by one-third from a record 12.2 million in 2022.

The slowdown in hiring and rising unemployment have overtaken inflation as the Federal Reserve's main worry as it lowers interest rates to try to keep the economy on solid ground. The central bank cut rates two weeks ago for the first time in four years.

The Fed jacked up interest rates to a 23-year high in 2022 and 2023 to tame high inflation, but it's tough approach also stunted the demand for labor, especially in sectors such as manufacturing.

A cooler labor market might help to keep future inflation in check, but the Fed doesn't want it to deteriorate any further lest it raise the risk of recession.

Key details: New job openings in August were largely concentrated in construction (138,000) and state and local government (78,000).

Most other industries report flat or lower job openings.

The number of job openings for each unemployed worker held steady at 1.1, putting it close to prepandemic levels. The ratio had surged to a record 2.0 in the immediate aftermath of the pandemic.

The trend in job postings provides clues about the health of the broader economy even though many openings are never actually filled.

Big picture: A flood of hiring after the pandemic is turning into a trickle - and that's pushed the unemployment rate up to 4.2% from a cycle low of 3.4%.

Some 1.3 million people have entered the labor force since January, but only 282,000 have found work, based on data from the government's employment survey of households.

The saving grace is that layoffs are extremely low. The rate of layoffs fell slightly to 1.0% in August, just a tick above the record low.

Looking ahead: "The labor market we see now is much cooler than the one we had a year ago, slowed in part by the effects of high interest rates over time," said Elizabeth Renter, senior economist at NerdWallet. "These effects will continue to impact firms and employees, even as the Fed has begun cutting rates."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX fell in Tuesday trading.

-Jeffry Bartash

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10-01-24 1155ET

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