Good morning. Two measurements tell two stories about the strength of U.S. employment. |
 | | An office in Manhattan this year.Jeenah Moon for The New York Times |
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Here's something pretty much anyone who follows economic data closely can agree on: The U.S. labor market is hot, but cooling. |
What's less clear is just how hot it is, or how fast it's cooling down. That question matters a lot to Federal Reserve policymakers trying to find a way to bring inflation under control without causing a recession. In today's newsletter, I want to take you through two measures that offer subtly but importantly different answers. Consider this chart: |
 | | Data is through September 2022 and seasonally adjusted. | Source: Bureau of Labor Statistics |
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The top line, in blue, shows the number of job openings that employers are trying to hire workers for. It shows a labor market that is extraordinarily strong and has only recently begun to cool. The bottom line, in yellow, shows the number of people who voluntarily quit their jobs each month. Many economists consider that statistic to be a key barometer of the strength of the labor market. It suggests the labor market is strong, and not so far out of line with historical patterns. |
I'll explain more about these numbers and why I'm highlighting them in a moment. First, though, it's worth understanding why these questions matter in the first place. |
The biggest problem facing the economy right now is that prices are rising much too quickly. That dynamic stems partly from the lingering effects of the pandemic, which continue to disrupt international supply chains, and global forces, like the war in Ukraine, which has pushed up the price of food and energy. Most economists agree that rapid inflation is also at least partly the result of excessive demand: American consumers want more cars, airline tickets and restaurant meals than companies can produce, pushing up prices. |
The Fed is trying to tamp down demand by raising interest rates, which makes borrowing money more expensive for consumers and businesses. Yesterday, the central bank announced it would raise rates by three-quarters of a point for the fourth time since June. |
That move was widely expected. But experts are less in agreement about what the Fed will do in the months ahead. Some economists argue it should hold off on further rate increases and see whether inflation begins to ease. Others say the Fed should keep going until its efforts clearly have an effect. |
Which path policymakers choose depends in part on how Jerome Powell, the Fed chair, and his colleagues view the labor market. If companies keep adding jobs and raising pay, inflation is likely to remain high, and the Fed is likely to remain aggressive in its fight to tame it. If job growth stalls and unemployment rises, the Fed could pause sooner to avoid causing a recession. |
So far, the Fed seems firmly on the side of those who see the job market as too hot. Powell said yesterday that any talk of a pause in rate increases is "premature." |
For the past year, the Fed has been focused on one measure of the labor market in particular: job openings. Powell has repeatedly noted that there are roughly twice as many vacant jobs as unemployed workers available to fill them. |
The logic behind Powell's attention on job openings is simple. They are a direct measure of demand, since employers typically don't try to hire when no one is buying their products. And they have a clear connection to wage growth — and therefore inflation — because when lots of companies are hiring, they have to pay more to compete for workers. |
Fed officials have been hoping that as interest rates rise, companies would respond by cutting back on recruitment. So far, we've seen only limited evidence of such a trend. |
Some economists, however, have begun questioning the Fed's focus on job openings. Other signals, like the unemployment rate, show the labor market is strong, but not nearly as strong as openings would imply. |
Which brings us to our second indicator: what economists call quits. |
You probably read about the "great resignation," the surge in people leaving their jobs as the economy re-emerged from Covid-induced lockdowns. The phenomenon was real, but the narrative often missed a crucial element: Most weren't quitting to sit on the couch. They were taking other, usually better-paying, jobs. |
Economists see quitting as a sign of confidence among workers: Changing jobs is a risk, so people avoid doing so if they're worried about the economy. And since people typically don't jump employers without a bump in pay, job-switching contributes to wage growth. Data released yesterday from ADP, the payroll-processing giant, showed that people who switched jobs in October saw their pay rise roughly twice as quickly as people who stayed put. |
In late 2020 and early 2021, resignations and job openings rose roughly in tandem. But then the number of people quitting began to level off, even as openings kept rising. Americans are still changing jobs more than they were before the pandemic, but only modestly so. |
So if openings suggest the labor market is a raging inferno, resignations imply it is more like an uncomfortably hot day. |
 | | President Biden last night.Pete Marovich for The New York Times |
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 | | A checkpoint in Kharkiv, Ukraine, this week.Finbarr O'Reilly for The New York Times |
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- Ethiopia's government and forces in the country's northern Tigray region agreed to end a two-year civil war that has killed hundreds of thousands of people.
- Tens of thousands of Brazilians protested President Jair Bolsonaro's election defeat, massing outside military bases to demand that troops step in to prevent a transfer of power.
- Benjamin Netanyahu will likely become Israel's prime minister again today, putting far-right groups at the heart of the country's political system.
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 | | The train station's bar.Lanna Apisukh for The New York Times |
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No train to catch: The bar at Moynihan Train Hall in New York is a destination for drinkers without travel plans. |
Lives Lived: Gael Greene, New York magazine's restaurant critic for four decades, had a keen appetite and boundless energy. She died at 88. |
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A rare feat: Four Astros pitchers combined to throw only the second no-hitter in World Series history to win Game 4 against the Phillies, tying the series at 2-2. The Times's Tyler Kepner explains how the Astros' pitchers got so good. |
Potential sale: The Washington Commanders owners Daniel and Tanya Snyder have hired bankers to explore selling the team amid mounting pressure from politicians and fellow N.F.L. team owners. |
Under fire: Nets guard Kyrie Irving announced he will donate $500,000 to organizations that "work to eradicate hate and intolerance" after he promoted an antisemitic documentary on Twitter. |
 | | Klaus Kremmerz |
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It's a staple at baby and bridal showers: opening present after present in front of an audience, expressing (or faking) delight for each. Few people seem to enjoy the tradition: The wedding website Zola found that three in four would rather not open shower gifts in front of others. |
The ritual may be on its way out. Many shower hosts now say they're going for "casual and coed" vibes and trying to make the most of the time together instead. And there's still a way to show your appreciation for those gifts: a thank-you note. |
 | | Bobbi Lin for The New York Times |
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Three new portraits, of Serena and Venus Williams and Ava DuVernay, are coming to the National Portrait Gallery next week. |
The pangram from yesterday's Spelling Bee was wildcat. Here is today's puzzle. |
Thanks for spending part of your morning with The Times. See you tomorrow. |
Matthew Cullen, Lauren Hard, Lauren Jackson, Claire Moses, Ian Prasad Philbrick, Tom Wright-Piersanti and Ashley Wu contributed to The Morning. You can reach the team at themorning@nytimes.com. |
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