In December, U.S. employers posted 9 million job openings, a rise from November, signaling the ongoing strength of the American job market despite the challenge of higher interest rates.
The reported number of openings saw an uptick from November’s 8.9 million, which was itself revised upward in the latest government report. Although job openings have gradually decreased since reaching a peak of 12 million in March 2022, they remain historically elevated. Monthly openings had never exceeded 8 million before 2021.
However, a note of caution emerged as layoffs increased in December, and the number of Americans voluntarily leaving their jobs—often considered an indicator of confidence in finding better opportunities—reached its lowest level since January 2021.
Despite the impact of sharply higher interest rates, the U.S. economy and job market have displayed resilience. The Federal Reserve raised its benchmark interest rate 11 times between March 2022 and July 2023, reaching a 23-year high of approximately 5.4%.
The Fed aims to cool down the job market from the intense levels observed in 2021 and 2022, reducing pressure on businesses to raise wages and potentially pass on costs to customers through higher prices.
Higher interest rates have contributed to a slowdown in hiring, but the overall job growth rate remains relatively robust. In 2023, U.S. employers added 2.7 million jobs, a decrease from the 4.8 million added in 2022 and the record 7.3 million in 2021. The upcoming January employment report is expected to reveal the addition of a solid 177,000 jobs.
The moderation in the job market is occurring through a decrease in job openings. Despite notable layoffs, the overall number of job cuts across the economy remains comparatively low.
The unemployment rate has maintained a streak below 4% for 23 consecutive months, the longest since the 1960s. Applications for unemployment benefits, a proxy for layoffs, have also remained unusually low.
While inflation has decelerated after reaching a peak in mid-2022, it still exceeds the central bank’s 2% target.
The Federal Reserve has signaled its intention to reverse course and implement three rate cuts this year. However, following its latest policy meeting ending on Wednesday, it is expected to leave rates unchanged. Financial markets anticipate the first rate cut possibly as early as March, but continued job market strength might make policymakers cautious about acting before mid-year.
Rubeela Farooqi, Chief U.S. Economist at High Frequency Economics, remarked, “These data—indicating robust demand for workers—do not support imminent rate cuts. They support a cautious approach going forward, allowing policymakers to ensure that inflation will reach their 2% target.”
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