U.S. layoffs declined for the third consecutive month in September and job openings increased

*The U.S. Job Openings and Labor Turnover Survey (JOLTS) - released with a one-month lag - showed that layoffs fell to a series-low in September (monthly data began in 2000) and that job openings increased, while hires declined. Although JOLTS is lagged, it provides valuable insights into labor market dynamics, complementing the Official Employment Report.

*Nonfarm payrolls have increased by a cumulative 12.1m since May, recouping 55% of the 22.2m decline in payrolls in March and April, and the unemployment rate has fallen to 6.9%, well below its April peak of 14.7% (US employment report strong in October, November 6, 2019). Although the rate of hires has slowed from the initial surge associated with the reopening of the economy, the sharp decline in layoffs is supporting solid net gains in nonfarm payrolls.

Job openings increased by 84k to 6.4m in September, still below its pre-pandemic average of 7.1m and indicative of somewhat soft labor demand. The number of job openings was markedly less than the 12.6m unemployed persons in September (Chart 1). Note that job openings exceeded the number of unemployed persons between early 2018 and early 2020, when the unemployment rate fell to near 50-year lows. Job openings in the following sectors have climbed back close to their pre-pandemic levels: manufacturing (456k), transportation, warehousing, and utilities (279k), professional and business services (1.3m), and health care and social assistance (1.1m).

Hires decreased by 81k to 5.9m in September, close to the pre-pandemic average, but down significantly from the 7.1m average in May and June when the economy reopened (Chart 2). Hires surged in the wholesale trade (+73k to 208k), and transportation, warehousing, and utilities (+46k to 296k) sectors in September, consistent with the sizable inventory rebuild and strong demand for online distribution platforms (Chart 3, U.S. inventory rebuilding and production: a positive note, September 23, 2020). Although job openings in the information and financial sectors remain depressed, their hires increased to 95k and 223k, respectively, in September, returning to pre-pandemic levels.

Job separations inched further below the pre-pandemic average of 5.7m in September, declining by 25k to 4.7m, reflecting a 200k decline in layoffs to 1.3m - the lowest level on record (Chart 4) - and only 3.0m voluntary job quits, compared to 3.5m quits in the months leading up to the pandemic. Layoffs declined in most sectors. The low level of voluntary job quits indicates that households are not yet confident in job-finding prospects.

Data on labor force flows from the October Employment Report indicate that hiring likely picked up in October as 3.5m persons moved from “unemployed” to “employed,” an improvement from 3.3m in September. In a sign that job separations continued to decline in October, 6.1m persons moved from “employed” to “unemployed or not in the labor force”, a decline from 7.1m in September (Chart 5).

High frequency data on online job openings continued to inch higher throughout October and continuing claims for unemployment insurance fell, a positive sign for further declines in the unemployment rate (Charts 6 and 7).

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Roiana Reid, [email protected]

Member FINRA & SIPC
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