The Labor Statistics Bureau’s labor market report released on September 29 was a bit counterintuitive: August JOLTS showed job openings falling by 256,000 to 7.079 million, the lowest in five months, marking the third consecutive month below expectations (the market had been looking for 7.22 million). At the same time, layoffs decreased by 61,000 to 1.641 million, the lowest since March 2025, with the layoff rate easing from 1.1% to 1.0%.
Openings are dropping, and so are layoffs—this isn’t a recession, it’s “a freeze.”
In terms of the mechanism, businesses aren’t expanding or contracting; instead, they rely on natural attrition to squeeze labor costs, so the disappearance of vacancies doesn’t translate into rising unemployment. The number of vacancies per unemployed person fell from 1.1 to about 1; the 2022 peak was 2. You also need to look at the structure: vacancies in real estate and the rental and leasing industry nearly halved to 50,000, the lowest since February 2014; and small firms with 1 to 9 employees are also contracting noticeably. The parts of the economy first hit by high interest rates are exactly the most rate-sensitive sectors. The rate of quits has held steady at 1.9%, matching the low levels since 2020—workers aren’t willing to switch jobs. That’s a confidence issue, not a job availability issue.
Position: This data is bad news for expectations of “cuts soon.” In a freeze-style market, wage inflation cools more slowly, giving the Fed reason to keep policy tight. Just in September, it raised rates to 3.75%-4.00%, the first rate hike since 2023; the probability the market assigns to another hike in October is about 70%.
Next, watch Friday’s nonfarm payrolls: if the unemployment rate stays at 4.1% and new employment is around 90,000, then “low hiring and low layoffs” can still hold up. But if the layoff rate jumps, the nature of the situation changes immediately.
Which do you fear more—vacancies gradually drifting lower while layoffs stay put, or layoffs suddenly rising and pulling vacancies down together?
#US August Job Openings Fall to a Five-Month Low
Openings are dropping, and so are layoffs—this isn’t a recession, it’s “a freeze.”
In terms of the mechanism, businesses aren’t expanding or contracting; instead, they rely on natural attrition to squeeze labor costs, so the disappearance of vacancies doesn’t translate into rising unemployment. The number of vacancies per unemployed person fell from 1.1 to about 1; the 2022 peak was 2. You also need to look at the structure: vacancies in real estate and the rental and leasing industry nearly halved to 50,000, the lowest since February 2014; and small firms with 1 to 9 employees are also contracting noticeably. The parts of the economy first hit by high interest rates are exactly the most rate-sensitive sectors. The rate of quits has held steady at 1.9%, matching the low levels since 2020—workers aren’t willing to switch jobs. That’s a confidence issue, not a job availability issue.
Position: This data is bad news for expectations of “cuts soon.” In a freeze-style market, wage inflation cools more slowly, giving the Fed reason to keep policy tight. Just in September, it raised rates to 3.75%-4.00%, the first rate hike since 2023; the probability the market assigns to another hike in October is about 70%.
Next, watch Friday’s nonfarm payrolls: if the unemployment rate stays at 4.1% and new employment is around 90,000, then “low hiring and low layoffs” can still hold up. But if the layoff rate jumps, the nature of the situation changes immediately.
Which do you fear more—vacancies gradually drifting lower while layoffs stay put, or layoffs suddenly rising and pulling vacancies down together?
#US August Job Openings Fall to a Five-Month Low