U.S. Labor Market Cools Orderly as Job Openings Return to Pre-Pandemic Norm

The U.S. labor market continued its orderly normalization in September, with the Job Openings and Labor Turnover Survey showing 7.4 million openings, down from 8.9 million a year earlier and the lowest reading since March 2021.

The ratio of job openings to unemployed workers, closely watched by Federal Reserve officials, has fallen to 1.1 from a peak of 2.0 in 2022. Chair Jerome Powell has previously cited a return to 1.0 as consistent with the pre-pandemic balance.

Quits, a leading indicator of worker confidence, fell to 2.1% of the workforce. Layoffs remain historically low at 1.0%, but have edged up in manufacturing and professional services.

"This is what a soft landing looks like in the labor market," said Daniel Kim, labor economist at Brookfield Advisors. "Employers are not panicking, workers are not confident enough to job-hop, and wage pressure is gradually easing."

Wage growth has moderated. Average hourly earnings for production and nonsupervisory workers rose 3.7% year-over-year in September, down from 4.4% at the start of the year. The Employment Cost Index, the Fed's preferred measure, is running at 3.9%.

Sector detail matters. Healthcare, government, and construction continue to add jobs at a solid pace. Information, financial activities, and manufacturing have all shed headcount over the past six months. Retail employment is roughly flat.