The war for talent is still on, but most industries have cut job openings, a leading indicator of a softening labor market.
Some cracks are emerging in America’s long-running growth story — or at least some warning signs.
While job creation has continued at an impressive pace, the number of openings has fallen sharply, according to government data released recently. In December, job openings in the private sector fell by 1.1 million, a decline of over 16%. That’s the steepest downturn since 2009, when the country was still reeling from the Great Recession.
“Any economic comparisons to 2009 tend to be concerning,” said Daniel Zhao, senior economist and data scientist at Glassdoor, one of the world’s largest job sites. “This is a sign the labor market is slowing down.”
Many key indicators are still strong, including the latest jobs report. In January, the U.S. added 225,000 nonfarm jobs, far surpassing economists’ expectations. Zhao also noted that total job openings are high by historical standards, topping 5.7 million in December. And openings still exceed the number of unemployed people, a reflection of how tight the labor market remains for many employers.
The unemployment rate is near a 50-year low, too. But that’s a lagging indicator, turning up only after people start to lose jobs. In contrast, job openings are forward-looking, offering insight into where trends may be heading.
Employers can add openings or pull them quickly, based on what they’re seeing in real time, Zhao said.
“They can’t hire or fire nearly as fast,” he said.
December’s big drop wasn’t a one-off. Job openings began falling in mid-2019 and accelerated through the end of the year, hitting double-digit declines in November and December.
And that was before the coronavirus spread and Boeing’s troubles with the 737 Max started to affect more workers.
The cut in job openings has been widespread, hitting most industries. In December, year-over-year openings declined by over 20% in retail trade, financial activities, construction, and transportation and warehousing, according to the U.S. Bureau of Labor Statistics.
The steepest drop came in mining and logging, which includes the oil and gas business. It slashed job openings by 52% in December, following cuts of over 30% in the previous two months.
Perhaps it’s not surprising that mining and logging jobs also declined, falling nationally and in Texas. Last year ended with 10% fewer Texans working in that sector.
That reflects a steady decline in the oil rig count and a glut of oil around the globe, said Robert Dye, chief economist at Comerica Bank in Dallas.
“We just had too many wells and too much capacity out there,” Dye said.
In a recent report, Dye cited the drop in U.S. job openings and wrote: “If sustained, this could mark a significant shift in labor market dynamics.”
Economist Daniel Silver of JPMorgan Chase struck a similar tone, writing that the decline in openings “signals that job growth could slow at some point.”
The U.S. economy has added jobs for 112 consecutive months, the longest growth streak in recent history. A decline of over 1 million job openings “is not business as usual,” Dye said.
To assess trends, he considers a basket of leading indicators, including openings, claims for unemployment insurance and anecdotes about corporate layoffs. Unemployment claims remain very low, he said, but layoff announcements are on the rise.
He cited last week’s announcement from HSBC of the United Kingdom, one of the world’s largest banks. It plans to cut 35,000 jobs over three years. Last month, Wichita-based Spirit AeroSystems, a major subcontractor on the troubled Boeing 737 Max, said it was laying off 2,800 workers, and furloughs are spreading to other sites in Kansas and Oklahoma.
In January, nearly 68,000 job cuts were announced by U.S.-based employers. That’s twice as many as in December and the highest monthly amount in almost a year, according to recruiting and outplacement firm Challenger, Gray & Christmas.
“We’re very busy right now,” said Andrew Challenger, vice president of the Chicago firm. “There are a lot of layoffs.”
It’s still a tight market for hiring, but negative signals are piling up, he said. And many employers are worried about how long the record expansion will continue.
“They’re saying, ‘Do we really want to add a huge number of employees in this environment?’” Challenger said.
Glassdoor tracks online job listings while the government surveys employers, so the website has different numbers. Its job market report shows a decline in openings, although not as steep as the federal figures.
In the Dallas metro area, Glassdoor said total openings fell 3.5% in January. But several sectors showed a year-over-year increase, including construction, finance, health care and tech.
Christopher Slijk, an associate economist at the Federal Reserve Bank of Dallas, offered another potential explanation for the decline in job postings: Maybe employers are discouraged, in the same way job-hunters get discouraged and drop out of the labor market.
In surveys of Texas business by the Dallas Fed, the share of companies trying to hire workers declined from May to November. Over 80% said they were having problems finding qualified applicants.
“Many may have the sense that the workers they’re trying to hire are just not out there,” Slijk said. “So they pull back and try to figure out alternatives.”
According to the Dallas Fed’s November survey, two-thirds of respondents were increasing wages and benefits and cutting back on recruiting. Two years earlier, those numbers were almost exactly flipped — with a big majority of companies choosing to intensify their recruiting.