A once massive economic tailwind has faded 💨

Job openings have more than normalized. But a new tailwind may be emerging 🌬️

Photo by Saad Chaudhry on Unsplash

One of the unusual characteristics of the current economic expansion had been the persistence of excess demand.

While that excess demand was a key force driving up inflation, it also explained why the economy was at low risk of falling into recession in recent years.

The most obvious manifestation of excess demand was job openings. Simply put, when there’s a lot of activity in the economy, employers staff up staff up to meet demand.

Not only was the level of job openings breathtakingly high (12.2 million at its March 2022 peak), but that level also far exceeded the number of unemployed people (2 job openings per unemployed person at that peak*). That’s why in the March 4, 2022, TKer, I identified job openings as one of the “Three massive economic tailwinds I can't stop thinking about.”

But as the labor market has cooled (which we have been discussing for months), this once massive tailwind has dissipated.