Labor Market Isn't "Softening", It's Shrinking

The Illusory Job "Openings" Are A Distraction. Ignore Them

Here’s a bit of economic reality: if a job opening goes unfilled for months and months and months, that “job” never existed in the first place. It was just smoke and mirrors.

The employment “experts” on Wall Street seem pathologically unable to grasp this basic reality. They are obsessed with the completely fictional “Job Openings” data from the Bureau of Labor Statistics Job Openings and Labor Turnover Survey Report.

On the last business day of July, the number of job openings was little changed at 7.7 million and was down by 1.1 million over the year. The job openings rate, at 4.6 percent, changed little in July. The number of job openings decreased in health care and social assistance (-187,000); state and local government, excluding education (-101,000); and transportation, warehousing, and utilities (-88,000). Job openings increased in professional and business services (+178,000) and in federal government (+28,000).

If the job openings were real, these numbers would mean something. As long-time readers are already aware, those numbers have not been real for a very long time.

That the job openings numbers are meaningless has not stopped the “experts” on Wall Street from hyperfocusing on them to the exclusion of all other data.

The department’s closely watched Job Openings and Labor Turnover Survey showed that available positions fell to 7.67 million on the month, off 237,000 from June’s downwardly revised number and the lowest level since January 2021.

Economists surveyed by Dow Jones had been looking for 8.1 million.

With the decline, it brought the ratio of job openings per available worker down to less than 1.1, about half where it was from its peak of more than 2 to 1 in early 2022.

The problem is that the underlying hiring patterns have never supported the claimed labor market pressures throughout the (Biden-)Harris Reign of Error, as is easily seen by looking at the data.

Since 2017, total hiring and total separations have moved in a band between 5,000 and 7,000 jobs.

The only exception to this trend is the Pandemic Panic Recession and the immediate aftermath (one of the many reasons we have to discount 2020 as “The Year Everything When Crazy”).

While reported job openings did rise during the Trump Administration, the magnitude of the rise was not nearly what we have seen since 2021. More importantly, job openings plateaued for the Trump Administration as unemployment bottomed out, thereby capping the ratio of job openings to unemployed workers at just under 1.25 job openings per unemployed worker.

During the (Biden-)Harris Administration, however, that threshold was blown through fairly quickly and stayed blown.

This happened despite a massive increase in the number of potential workers not in the labor force. Somehow the job openings that were being reported failed to pull workers sidelined during the Pandemic Panic back into the labor force.

We did not see this behavior during the Trump Administration. At that time the job openings growth tracked with a decline in the number of potential workers not in the labor force.

That the job openings are not responding to worker availability can only mean employers are prefer to see those reported openings remain unfilled—which effectively means they don’t exist. For the persistence of the high levels of openings being reported to be meaningful there would have to have been significant shifts among those not in the labor force that we simply do not see.

Presumably, the declining job openings number means the data is returning to reality—that is really what the Wall Street “experts” are hoping.

However, when we discard the job openings and focus on the hiring and separations data, we see that the jobs market is quite a bit softer than the “experts” want to admit.

Hiring actually peaked in early 2022 and has been declining ever since. Quits have been declining as well, indicating that “the Great Resignation” has subsided, but layoffs actually began trending up starting in October 2021, as we can see if we index hiring and layoffs to January 2021.

Rising layoffs mean business are getting rid of workers. Declining hires mean those workers are not being replaced. That is not a sign of a healthy labor market.

Broadly, total hiring has still managed to outpace total separations, but that’s a diluted blessing when both are trending down.

The net result has been a steadily shrinking hiring pace since shortly after Joe Biden and his “co-President” Kamala Harris took office.

Looked at another way, between hires and separations in most months of the (Biden-)Harris Administration, the change in net hiring has been negative.

This trend was plainly visible in the softening and then also negative changes to the overall employment level.

The signals have been there in the data all along, as the employment level showed that there was no real job growth in 2022, and there is now job loss since November of last year.

As the risk of outrageously blowing my own horn, I will say that anyone paying attention to the data—which is to say anyone reading this Substack—knew by the end of 2022 that the jobs numbers the (Biden-)Harris Administration was touting did not add up, and that not even the Philly Fed could cover for them.

Philadelphia Fed Confirms BLS Is BS

These signals have been present all along, and they have, as I have argued repeatedly, portrayed US labor markets as highly dysfunctional, with some of the factors pre-dating the COVID Pandemic Panic.

October JOLTS: Fewer Fake Job Openings, Labor Markets Still Toxic

Labor markets in the US have been toxic for a very long time and nothing the (Biden-)Harris Administration has done alters that in the slightest.

Tight Labor Markets?

Maddeningly, the “experts” who by rights should know better than anyone the employment situation in this country—those on Wall Street—are every bit as clueless as the (Biden-)Harris Administration. They are obsessed with fictional job openings that there is precious little evidence any company has made any serious effort to fill, while ignoring a very real and persistent negative trend within the hiring data, and which has led directly to the current jobs recession which began by November of last year.

Wall Street is right about one thing: the Fed probably does not want these jobs figures to get any worse.

Unfortunately for Wall Street, their “experts” get everything else about the JOLTS report completely wrong.

What both Wall Street and Washington get wrong is that the labor market is not growing in this country. It’s shrinking, and it has been for some time. The data shows that plainly, even if the “experts” do not want to see it.