The Great Resignation was fun while it lasted, but the party for job seekers may be coming to an end.
This is actually a good thing for the economy.
Fewer job openings might sound bad, but after months of a jobs glut and not enough workers, a decline means mismatch might be closing. That could result in more clarity for policymakers, companies, and job seekers alike.
Job openings – the go-to signal for tracking the labor shortage – peaked in March as restrictions lifted and the economy reopened. The count hovered near record highs through much of 2022, but August data showed a sudden shift: Openings tumbled by 1.1 million across the US, marking the largest decline since early 2020.
Openings probably won’t drop by that much in September, but the trend is clear. Companies are reining in their hiring plans as the economic outlook sours and interest rates soar. But hiring and layoffs held steady through August, signaling that workers aren’t getting hit too hard by the Federal Reserve’s inflation fight just yet.
That combination of tumbling openings and still low layoffs offers a glimmer of hope for the US economy.
Less pressure on the Fed to cause pain for Americans
Julia Pollak, the chief economist at ZipRecruiter, says it’s helpful to think of the labor market as a game of musical chairs. Through much of 2022, there were far more chairs (job openings) than players (available workers). But chairs started being pulled away at a much faster pace in August, which could give job seekers a wake-up call.
“If there are 100 chairs and 50 workers, workers are cool, man!” Pollak said. “All the way down to 51, things are still fine. There’s a tipping point at which suddenly it’s not that much of a game anymore, and job seekers are a bit more desperate to take the first job that’s out there.”
That renewed balance between workers and employers is exactly what the Fed is shooting for. Its chair, Jerome Powell, has repeatedly highlighted the ratio of job openings to unemployed workers as a sign that the labor market is unsustainably tight.
But the Fed isn’t exactly trying to jack up unemployment. Its primary fear is that a persistently tight labor market will drive wages sharply higher and create a dreaded wage-price spiral in which bigger paychecks lead to more spending, which in turn leads to price hikes and even larger pay gains — and on and on.
Powell said in September that bringing inflation lower would likely require some “softening” of the labor market in the form of higher unemployment and slower wage growth. But the recent drop in job openings suggests the labor market could normalize without widespread job loss.
Pollak said that having two or three job openings per available worker doesn’t necessarily mean there are actually that many job openings — rather, it reflects companies’ urgency and recruiting intensity.
“Job openings didn’t just reflect how much more hiring would take place but how much more recruiting intensity needed to take place to get those hires,” Pollak said.
As that urgency fades a little, so do the openings. Pollak said that would also probably lead to quits breaking even, since they’re so high because of just how many job openings there are. Even so, she added, quits are likely to stay permanently higher than the precrisis norm because remote work makes it easier to switch to a new role.
Workers won’t have to deal with ‘ghost’ job openings — and they probably won’t get laid off either
The tight but ever fluctuating labor market has also led to a spooky hiring phenomenon: ghost jobs.
Companies are putting up record job openings, but they’re not saying when – or even if – they’ll fill them. That’s frustrated some job seekers as they apply to multiple roles and never hear back.
Ghost jobs are the result of a confluence of economic factors. Companies aren’t sure where the economy is headed, so they’ll post the job and see what happens. Others might leave in-demand postings up indefinitely to see if they can snag any candidates. Still others want to fill their pipeline for when they have the bandwidth to hire.
On the worker side, that can feel a bit like visiting Willy Wonka’s chocolate factory. There’s supposed to be an abundance of jobs and opportunities around them — they just can’t seem to touch or reach them.
Companies’ getting more realistic with their job openings, then, might be a bittersweet comfort for job seekers: They’re not pouring time and resources into an application with very little hope of a response.
With ghost jobs hopefully disappearing into the Halloween ether and the latest jobs data showing strong – but not too strong – hiring, a soft landing is still a possibility.
“At least from the labor market’s perspective, the job market is doing its part to getting us towards the soft landing,” Daniel Zhao, the lead economist at Glassdoor, told Insider. That comes from wage gains and job gains moderating.
Nick Bunker, the economic research director at Indeed Hiring Lab, described declining job openings but steady unemployment as “one of the items on the soft-landing checklist.”
What we’re not seeing right now, Bunker said, is any sign of layoffs picking up. That’s good news for everyone rattled about a recession, and it suggests employers have maybe learned a lesson or two from labor shortages.
“Employers are not letting go of workers,” Bunker said. “They’re very much holding on to workers.”
Pollak said that if a downturn does come, “layoffs are not going to be where the action takes place this time around.” That’s because companies have already been so cautious that they won’t have fat to trim.
“I don’t see this as being the bloodbath that the beginning of the pandemic was,” Pollak said.