The hot but cooling labor market in 16 charts 📊🔥🧊

Making sense of a complicated dynamic 👍

A number of labor market metrics have been deteriorating for months. Yet most metrics also confirm that the labor market remains tight.

It’s a dynamic that has confused and surprised observers. Even Fed Chair Jerome Powell recently acknowledged these aren’t normal times.

“For example, so far, job openings have declined substantially without increasing unemployment — a highly welcome but historically unusual result that appears to reflect large excess demand for labor,“ Powell said at the Jackson Hole Economic Policy Symposium last week.

The key metric that seems to be driving the current labor market narrative is the ratio of job openings to the number of unemployed people. As of July, this sat high at 1.5 openings per unemployed person. While down from its record high of 2x in March 2022, it remains well above the prepandemic level of 1.2x.

There continue to be many more job openings than there are unemployed people. (Source: BLS via FRED)

The signal from this ratio is pretty intuitive: When this metric is greater than 1x, there are more jobs available than unemployed people. If it’s above some historical average, then you could argue the labor market is tighter than usual.

These elevated levels of job openings over the past two years have been a massive tailwind for the economy. They arguably explain everything that’s been happening in the economy and the markets.

Now, many have questioned the accuracy of job openings figures reported by the Bureau of Labor Statistics. Specifically, there are concerns these figures are inflated. And I mostly agree with the concerns!

For more on these doubts, read: Were there really twice as many job openings as unemployed people? 🤨

For me, the question is not whether or not the job openings figures are inflated. Rather, the more important question is: Are job openings so inflated that they contradict what may actually be a weak labor market?

The answer is no.

Almost all of the other major employment metrics confirm that the labor market, while cooling, remains very hot.

Let’s go through a bunch of charts.