US October JOLTS consistent with “very tight labour market”

Summary: US quit rate falls back to 2.8% in October JOLTS report; consistent with “very tight labour market”; points to further strength in wage growth; quits, separations down, job openings up.

The number of US employees who quit their jobs as a percentage of total employment increased slowly but steadily after the GFC. It peaked in March 2019 and then tracked sideways until virus containment measures were introduced in March 2020. The quit rate then plummeted as alternative employment opportunities rapidly dried up. Following the easing of US pandemic restrictions, it proceeded to recover back to its pre-pandemic rate in the third quarter of 2020 before moving higher in the second and third quarters of 2021.

Figures released as part of the most recent Job Openings and Labor Turnover Survey (JOLTS) report show the quit fell back in October after it made a new series-high in September. 2.8% of the non-farm workforce left their jobs voluntarily, down from September’s 3.0% (after rounding). There were 205,000 fewer quits during the month and an additional 546,000 people employed in the non-farm sector in percentage terms.

“The data remained consistent with a very tight labour market, even if the ‘quits rate’ fell slightly to 2.8% from the record high of 3% in September,” said NAB currency strategist Rodrigo Catril.

Long-term US Treasury bond yields rose noticeably on the day. By the close of business, the 10-year Treasury yield had gained 5bps to 1.52% and the 30-year yield had jumped by 8bps to 1.89%. The 20-year yield finished 1bp lower at 0.68%.

“All up, the data continues to point to extremely strong labour demand…employers having a hard time finding workers. This bodes well for labour market tightening going into 2022 and points to further strength in wage growth,” said ANZ senior economist Catherine Birch.

The fall in total quits was led by 57,000 fewer resignations in the “Transportation, warehousing, and utilities” sector and 45,000 fewer resignations in the “Finance and insurance” sector. The “Professional and business services” sector experienced the single largest increase, rising by 21,000. Overall, the total number of quits for the month fell from September’s revised figure of 4.362 million to 4.157 million.

In contrast, total vacancies at the end of October increased by 431,000, or 4.1%, from September’s revised figure of 10.602 million to 11.033 million. The rise was driven by a 254,000 increase in the “Accommodation and food services” sector while the “State and local government” sector experienced the single largest decline, falling by 77,000. Overall, 13 out of 18 sectors experienced more job openings than in the previous month.

Total separations decreased by 255,000, or 4.1%, from September’s revised figure of 6.147 million to 5.892 million. The fall was led by the “Finance and insurance” sector, where there were 88,000 fewer separations than in September. Separations decreased in 11 out of 18 sectors.

The “quit” rate time series produced by the JOLTS report is a leading indicator of US hourly pay. As wages account for around 55% of a product’s or service’s price in the US, wage inflation and overall inflation rates tend to be closely related. Former Federal Reserve chief and current Treasury Secretary Janet Yellen was known to pay close attention to it.

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