US Labor Market Remains Robust Despite Signs of Weakness

While the most recent test of the strength of the US labour market is due on Friday with December payrolls, the November JOLTS data indicates that employment conditions are not yet losing steam. Openings rose relative to October and the lay-off rate was little changed, although the falling quits rate suggests that employees may be starting to worry about the prospect of finding alternative employments.

We continue to expect the Federal Reserve to pause at its next meeting in February, and to deliver only two 0.25 percentage point cuts in 2025. November’s JOLTS data, released on Tuesday, showed that the US labour market remains robust, even as some indicators gave signs of impending weakness. The signs of resilience were easy to pick out. Job openings rose to 8.1mn, above October’s upwardly revised figure of 7.8mn and above market expectations of 7.7m. The increase was driven by business and financial services, while the cyclical leisure industries shed workers. The vacancy to unemployment ratio stabilised at 1.13 after bottoming out at 1.07 in September. Still, it remains well below January 2024’s 1.42. The other sign of strength was the lay-offs rate. At 1.1 per cent, it was broadly in line with readings in previous months. There are as yet no discernible signs that employers are letting go of workers. Yet there were also pockets of weakness within the data. The quits rate, an indicator of employees’ confidence in their ability to find another job soon, dropped to 1.9 per cent from 2 per cent in October. As policymakers gauge the underlying strength of the labour market, the JOLTS data will be supplanted by more up-to-date payrolls data released on Friday. We therefore doubt that this release will hold much sway on the Federal Open Market Committee. Moreover, we doubt that the mixed signals in Tuesday’s release will give a clear steer to policymakers, most of whom are now signalling an imminent paus

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