Job data suggests ‘soft landing’ is increasingly likely, economists say

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The U.S. economy inched closer to a so-called “soft landing” after a new batch of labor data, economists said.

A soft landing is a good thing: It would mean the Federal Reserve has accomplished the difficult task of taming inflation without triggering a recession.

Job openings — a barometer of employer demand for workers — fell by 617,000 to 8.7 million in October, the lowest since March 2021, the U.S. Labor Department reported Tuesday in its monthly Job Openings and Labor Turnover Survey.

“Another key ingredient of a sustainably soft landing is falling into place,” Jason Furman, a professor at Harvard University and former chair of the White House Council of Economic Advisers during the Obama administration, wrote about job openings.

Why a soft landing is like ‘Goldilocks’ porridge’

Steaming bowl of oatmeal porridge, made with Irish oats, wheat berries, barley

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“It’s absolutely the best possible outcome,” said Julia Pollak, chief economist at ZipRecruiter. “And I think the chances [for it] get higher and higher all the time. We are very, very close.”

There is no official definition for a soft landing. According to conventional wisdom, it has only been achieved once — in 1994-95 — in the history of 11 Fed monetary-policy-tightening cycles dating to 1965, the American Economic Association wrote.

How the labor market fits in

Why the job market is already ‘back into balance’

The latest labor data added to encouraging news about a likely soft landing, economists said.

A big pullback in job openings didn’t coincide with weakness elsewhere: Quits and hires held steady around their respective pre-pandemic levels. Layoffs remain low and are about 17% below their pre-pandemic baseline, suggesting employers want to hold on to workers, Pollak said.  

Despite the large monthly decline, job openings are still 25% above their February 2020 level, she added.

It’s absolutely the best possible outcome. And I think the chances [for it] get higher and higher all the time.

Julia Pollak

chief economist at ZipRecruiter

In short: The labor market has cooled while layoffs haven’t spiked and workers still enjoy relatively good job security and prospects, economists said.

“It’s still a favorable labor market,” Pollak said.

However, workers have lost leverage relative to 2021 and 2022: Big pay increases aren’t as prevalent, nor are signing bonuses; while there remain ample job opportunities, they are harder to get, Pollak said. And, outside of industries like health care, in which there’s an acute labor shortage, the opportunities “aren’t quite as attractive,” she added.