US job openings fall to 6.5 million, fewest since 2020, as labor market remains sluggish

U.S. job openings plunged to their lowest level in more than three years last December, further evidence of a persistently sluggish labor market despite robust economic growth.

The Labor Department reported Thursday that vacancies dropped to 6.5 million in December from 6.9 million the previous month, marking the lowest figure since September 2020 during the COVID-19 pandemic. This decline came in below economists’ forecasts and coincided with a slight uptick in layoffs. Meanwhile, the number of workers quitting their jobs – typically viewed as a barometer of confidence in finding new employment – remained essentially unchanged at 3.2 million.

This latest data underscores an increasingly perplexing economic scenario where strong growth coexists with lackluster job creation. While gross domestic product surged at its fastest pace in two years during the July-September quarter, employment growth has stagnated dramatically since early 2023.

Since March, employers have added an average of just 28,000 jobs monthly – a stark contrast to the robust pace of 400,000 jobs per month during the post-pandemic hiring boom from 2021 to 2023. When the Labor Department releases January’s employment figures next Wednesday, economists anticipate a modest improvement with approximately 70,000 new jobs, up from December’s meager 50,000.

Other employment indicators point to similar weakness. ADP’s private sector employment report, released Wednesday, showed businesses added only 22,000 jobs in January, falling far short of market expectations. Meanwhile, outplacement firm Challenger, Gray & Christmas reported that companies cut more than 108,000 jobs in January – the highest monthly total since October and the worst January for job eliminations since 2009 during the Great Recession aftermath.

“The hiring recession isn’t going to end anytime soon,” said Heather Long, chief economist at Navy Federal Credit Union. “It’s yet another sign of how little hiring – or interest in hiring – is happening in this economy.”

The dichotomy between strong economic output and weak employment has economists puzzling over several potential scenarios. Some wonder if hiring might eventually accelerate to match the robust GDP growth, while others question whether economic expansion might slow to align with the tepid labor market conditions.

A third possibility gaining traction involves technological disruption. The rapid advancement and deployment of artificial intelligence and automation technologies could be enabling businesses to increase productivity and output without corresponding workforce expansion – potentially heralding a fundamental shift in the relationship between economic growth and job creation.

This employment slowdown comes at a critical juncture for the U.S. economy. The Federal Reserve has maintained high interest rates to combat inflation, which has shown signs of cooling in recent months. How the central bank interprets these conflicting economic signals – strong growth but weakening employment – could significantly influence its monetary policy decisions in coming months.

For job seekers and employers alike, this unusual economic landscape creates significant uncertainty. Industries most affected by recent layoffs include technology, financial services, and retail, according to the Challenger report, suggesting structural changes rather than merely cyclical adjustments.

As policymakers and economists continue monitoring these trends, the coming months will be crucial in determining whether this represents a temporary misalignment or a more fundamental shift in how the American economy functions in a post-pandemic, increasingly automated world.