The March JOLTS report shows the labor market is halfway to pre-pandemic normalization

– by a New Deal Democrat

The title of this article is important in suggesting the relative nature of this morning’s March vacancies and labor turnover report.

For the past few years, the job market has been a game of “reverse musical chairs” where there are always more chairs than participants. Those employers whose seats were not filled had to increase the wages and/or benefits offered or leave them without. That was good for labor, but it certainly put pressure on prices as well.

Because the labor market remained so strong, it was unlikely that a recession would begin unless the job opening situation returned to at least close to its pre-pandemic levels. Only then can there be enough layoffs to actually match the negative monthly job count.

This morning’s report, as stated in the headline, shows that we are halfway there. Vacancies (in blue in the charts below) fell by -384,000 to 9.590 million year-on-year (from a peak of 12.027 million 12 months ago, versus 7 million just before the pandemic), while actual hires (in red) fell by a whopping -1000 to 6.149 million (vs a peak of 6.843 million in Nov 2021 and 6 million just before the pandemic) and voluntary surrenders (gold) decreased by -129,000 to 3.851 million (vs a peak of 4.501 million in Nov 2021 and 3.5 million just before the pandemic pandemic:

All of the above are at roughly 2-year lows.

Here’s the longer-term view of all 3 metrics from the start of the series, better showing the current situation versus the historical one before the pandemic hit:

All three remain at levels higher than ever before the pandemic hit.

Also, layoffs and layoffs increased by 248,000 to 1.805 million on a year-over-year basis, also roughly a 2-year high):

Here is the long-term historical record for layoffs. Note that before the pandemic, the current level would have been quite low:

It would be wrong to simply predict declines from this month forward, but the overall trend is very clear.

All of the above remains consistent with a positive, even strong, jobs report next Friday by historical standards. But, along with a rise in initial jobless claims (which are a leading indicator of the jobless rate), the report is likely to be weak by the standards of the last 12 months, and the jobless rate is more likely to rise.