Watch hiring activity 👀

And listen to a new podcast about it! 🔊

Elevated hiring activity explains why layoffs haven’t led to higher unemployment. (Source: BLS via FRED)

Hiring activity remains strong in the U.S. economy.

According to BLS’s Job Openings and Labor Turnover Survey (JOLTS) released Tuesday, 6.16 million people were hired in February. This produces a hiring rate of 4.0%, which is hovering at the upper end of the pre-pandemic range.

The numbers help explain why, despite heavy news coverage of layoffs, the unemployment rate remains low and claims for unemployment insurance remain depressed.

It also confirms that elevated job openings — a massive economic tailwind — indeed reflect strong demand for labor.

But as the economy cools, hiring activity will be a key metric to watch, because a hiring slowdown — including a pickup in hiring freezes — could force unemployment higher if laid-off workers are unable to land new jobs.

🔊 LISTEN: I discussed hiring activity with Carson Group’s Ryan Detrick and Sonu Varghese on their “Facts vs Feelings” podcast. In addition to the markets and the economy, we talked about my background, my career in media, my approach to content with TKer, and much more! Catch it on Apple Podcasts, Amazon Music, Spotify, YouTube, or wherever you get your podcasts!

Cooling, but still hot 🔥

Tuesday’s JOLTS report also showed the number of job openings fell to 9.93 million in February, down from 10.56 million in January. This represented the lowest level of job openings since May 2021.

Job openings are cooling, but remain elevated. (Source: BLS via FRED)

During the period, there were 5.93 million unemployed people — meaning there were 1.7 job openings per unemployed person. This continues to be one of the most obvious signs of excess demand for labor.

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

There are far more job openings than there are unemployed people. (Source: BLS via FRED)

There’s little doubt these metrics have cooled in recent months, which is welcome news to the Federal Reserve amid the central bank’s fight to bring down inflation.

However, they nevertheless remain elevated well above pre-pandemic trends, and they continue to be among the reasons the economy refuses to go into recession. Ironically, they also help explain why inflation isn’t cooling much faster.

Importantly, the cooling in job openings hasn’t been accompanied by notable acceleration in layoff activity. U.S. employers laid off 1.5 million people in February. While challenging for all those affected, this figure represents just 1.0% of total employment, which is actually below the pre-pandemic trend.

At 1.0%, the layoff rate remains depressed. (Source: BLS via FRED)

Putting it all together, the labor market is cooling but remains pretty hot. And the fact that layoff activity remains low and the unemployment rate remains depressed suggest we could get the “goldilocks” soft landing scenario that everyone wants.

“The Fed has been looking for the labor market to cool without a recession, and [Tuesday’s] JOLTS report for February contained some signs in that direction,” wrote Michael Hanson, senior global economist at JPMorgan.

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Related from TKer:

• That's a lot of hiring 🍾

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• Beware alarming business stories that get a lot of news coverage 🗞️

• Don't be misled by no-context reports of big tech layoffs 🤨

• How job openings explain everything right now 📋

• Three massive economic tailwinds I can't stop thinking about 📈📈📈

• 9 reasons to be optimistic about the economy and markets 💪

• The bullish 'goldilocks' soft landing scenario that everyone wants 😀

• Were there really twice as many job openings as unemployed people? 🤨