The Post-Pandemic Job Bonanza Is History

The job market is starting to look a lot more like it did before the pandemic as employers lose their appetite for hiring, which had seemed insatiable in recent months. 

The number of job openings fell to 8.1 million in April, fewer than a downwardly revised 8.4 million in March and the lowest since February 2021, the Bureau of Labor Statistics said Tuesday. Forecasters had only expected a drop to 8.4 million from the previously reported March figure of 8.5 million, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

The number of people quitting their jobs rose slightly to 3.5 million from 3.4 million but remained close to the pre-pandemic level, suggesting workers have fewer opportunities to switch jobs for higher pay compared to recent years. Quitting peaked in April 2022, when 4.5 million people walked away from their jobs. 

On the bright side for workers, the number of layoffs stayed near historic lows, with 1.5 million workers laid off in April. That was the lowest number of layoffs since December 2022.

The data is the latest development in a pattern that began to emerge in the previous month’s report. Movement in the labor market is slowing down, with less hiring, firing, and layoffs. Job openings have fallen more than a third since peaking at more than 12 million in March 2022 as the economy bounced back from the pandemic downturn. The recent trend could translate into smaller raises for workers, and, in a silver lining for household budgets, less upward inflation pressure. 

“More than four years after the pandemic transformed the U.S. labor market, its balance of supply and demand is back to normal,” Bill Adams, chief economist at Comerica Bank, wrote in a commentary. 

The Federal Reserve’s campaign of anti-inflation interest rate hikes since March 2022 has pushed up rates on mortgages, credit cards, and other kinds of borrowing. The high interest rates are designed to discourage borrowing and spending in order to slow the economy and cool the formerly hot job market. Fed officials have worried that the high pay raises of recent years could stoke inflation.

Will Jobs Pullback Turn Into Layoffs?

While workers still have some of the best job security in history—unemployment rates and layoffs are both near historic lows—there’s a risk that if the job market slows further, that could change, Nick Bunker, economic research director for North America job hunting site Indeed, said in a commentary.

“The labor market’s descent continues to be smooth, but don’t take that as a guarantee the ride will stay so serene,” Bunker wrote. “Further declines in openings in coming months will make it difficult for hires to hold as steady as they have and would be a prelude to a more sustained increase in unemployment.”

Fewer Jobs, Lower Interest Rates?

The decline in job openings bolstered the confidence among financial markets that Fed officials will soon begin to cut the central bank’s benchmark interest rate from its current 23-year high. The chances of a September rate cut, as priced by markets, jumped to nearly 66% in the wake of the report, up from 59.6% the day before, according to the CME Group’s FedWatch tool, which forecasts rate movements based on Fed Funds futures pricng data.

“While the pace of labor market rebalancing has been bumpy, today’s data confirms the trend is still well intact with labor demand clearly cooling over the last two months,” Ali Jaffery, an economist at CIBC, wrote in a commentary. “That is more encouraging news for the Fed, as it portends softer wage pressure down the road. But the Fed will still need to see continued progress on the inflation front to feel confident about policy easing this year.”