Large states are creating more jobs

Total job openings in the United States increased to 8.1 million at the end of November; that was the highest number in six months.

Despite that, job openings were flat in most states compared to the prior month. California (+98,000), Texas (+82,000), North Carolina (+53,000) and Florida (+38,000) posted the largest gains. The largest decline occurred in Colorado (-92,000).

Real-time data from Indeed show that job postings are trending up in many large states. Since the beginning of November, more jobs have been posted in the southern states of Georgia, North Carolina, Florida and Texas. Part of the rise reflects recovery from hurricane damage.

Over the same period, new jobs postings rose in California and Washington. That signals a pickup in labor demand in places that remain below the pre-pandemic benchmark. Future demand may temporarily be hit in California because of the Los Angeles wildfires.

The ratio of job openings to unemployed job seekers, a measure of balance in the labor market tracked closely by Federal Reserve officials, came in flat at 1.1 for the fifth straight month. The ratio increased for the month in 24 states and Washington DC, including California and Washington. A higher ratio bodes well for job seekers.

Hiring and layoffs were flat in most of the country. This has been the story of the labor market over the past year: a low hiring rate has been offset by historically low layoffs. At the end of November, the hiring rate in Texas was only 2.9% but the layoff rate fell to 0.9%. The takeaway is that if you have a job, you are likely to keep it. If you don't, it is becoming more difficult to find work.

Quits changed little. The rate did decline in five states, including Arizona (-1.0% percentage point), North Dakota (-0.7%), Tennessee (-0.6%) and Oklahoma (-0.6%). Data from ADP show that the wage premium for switching jobs was higher at 7.1% in December, but a full percentage point lower compared to a year ago. Fewer workers are voluntarily leaving their jobs; that reflects the difficult hiring environment.

At the national level, the unemployment rate ticked down to 4.09% in December from 4.23% in November. Unemployment increased in 25 states and Washington DC but fell in six states. South Carolina (+1.8 percentage points), Rhode Island (+1.2) and Colorado (+1.0) posted the largest increases; the largest decrease happened in Connecticut (-1.2).

There is a tenuous balance between sluggish hiring and low layoffs.

Bottom Line

The state-level Job Openings and Labor Turnover Survey (JOLTS) data for November revealed a resilient labor market with some potential warning signs. There is a tenuous balance between sluggish hiring and low layoffs. Risks are to the upside that a change to one of these indicators, especially layoffs, could result in a weakening labor market, which the Federal Reserve is seeking to avoid. We expect the Fed to pause interest rate cuts in January but resume in March.