September 2024

Job openings and hires decline in 2023 as the labor market cools

This article discusses national trends for job openings, hires, and separations throughout 2023. Separations are broken down further into quits, layoffs and discharges, and other separations. Among industries, churn rates (hires rates plus separations rates) and job openings rates are examined and analyzed. Next, establishment size class data are presented at the total private level, and the article concludes with a brief look at state data, specifically state job openings compared with unemployment.

Overall, the labor market cooled in 2023, as evidenced by data from the Job Openings and Labor Turnover Survey (JOLTS). Following 2 years of growth, the number of job openings fell in 2023. The number of annual hires declined in 2023 for the first time since 2009. Layoffs and discharges increased in 2023. Overall, these trends denote a tightening in labor demand. (For definitions of JOLTS terms, see the box that follows.)

Job openings

Annual levels of job openings declined for the first time in 2023 since the COVID-19 recession of February–April 2020.¹ The annual average job openings level for 2023 was 9.4 million compared with 11.2 million the previous year. In the first month of 2023, job openings levels were at 10.4 million, a decrease of 15 percent from the peak of 12.2 million in March 2022. From February to April 2023, job openings levels oscillated between 9.6 million and 9.9 million. For the remainder of the year, the job openings level range decreased and was between 8.7 million and 9.4 million. Job openings in December 2023 ended at 8.9 million. Despite this downward trend, the number of job openings was still higher at the end of 2023 than the prepandemic level of 7.0 million in February 2020.

Job openings and unemployment

The relationship between job openings and unemployment tends to be negatively correlated. In May 2021, the job openings level surpassed the unemployment level for the first time since the COVID-19 recession. The difference between job openings and unemployment was at its largest in March 2022, at 6.2 million, when job openings hit their historical high of 12.2 million. The difference between job openings and unemployment continued to shrink during 2023.

The difference between job openings and unemployment narrowed from 4.7 million in January 2023 to 2.6 million in December. This decline was primarily due to the fall in the job openings level. However, unemployment levels rose from 5.7 million in January to 6.3 million in December, which also contributed to the narrowing of the gap.²

The ratio of unemployed people per job opening, which can provide insight into how difficult it is for workers to find employment, increased in 2023. When the ratio is below 1, there are more job openings than job seekers and the reverse is true when the ratio is above 1. If the ratio equals 1, the number of job seekers equals the number of job openings. The ratio reached a historical low of 0.5 in March 2022, when the number of job openings was at a historic high. However, the ratio has been steadily increasing since then. By the end of 2023, the ratio had risen to 0.7. (See chart 1.)

Hires

In January 2023, the hires level was 6.4 million. From February to May, the level oscillated between 6.0 and 6.2 million. For the remainder of the year, job openings were between 5.6 million to 5.9 million and then ended at 5.8 million in December. (See chart 2.)

In 2023, annual hires—the total number of hires during the year—saw a decline for the first time since 2009, the final year of the 2007–09 Great Recession. In 2022, annual hires numbered 76.6 million. In 2023, annual hires declined by 5.8 million to 70.8 million. From March 2022 to July 2023, the Federal Reserve increased the federal funds rate 11 times, with the target range exceeding 5 percent as of December 2023.³ Higher interest rates limit the amount of funds businesses can borrow, which can limit the number of workers they can hire.

Job openings and hires

Job openings and hires tend to have a positive correlation. The difference between job openings and hires may be an indicator of how difficult it is for employers to fill vacancies. In January 2021, job openings exceeded hires by 1.6 million. Then throughout 2021 to the beginning of 2022, the number of job openings rose more rapidly than the number of hires. The difference between the number of job openings and hires was at its largest at 5.6 million in March 2022. Since then, the difference has narrowed, driven largely by the decline in job openings level. This trend continued through 2023, and by the end of the year, the gap had narrowed to 3.1 million.

Separations

Total separations levels generally continued to decline in 2023. In the first quarter, total separations hovered between 5.8 million and 6.0 million. From April to October, the level for total separations oscillated between 5.6 million and 5.8 million. By the last 2 months of 2023, total separations had fallen to 5.4 million. (See chart 3.)

In 2023, the annual level for total separations was 68.1 million, a sharp decline from the 2022 level of 72.2 million. The annual average total separations rate (separations for the year as a percentage of employment) was 3.6 percent in 2023, compared with 3.9 percent in 2022.

Breakdown of separations

The three components of total separations (quits, layoffs and discharges, and other separations) often exhibit different economic trends. Quits—which are considered employee initiated—are procyclical, which means that the number of quits typically rises when the economy expands and declines when the economy contracts. Conversely, layoffs and discharges—which are employer initiated—are countercyclical, which means that the estimates typically rise during economic contractions and fall during economic expansions. Other separations—which include transfers, retirements, separations due to disability, and deaths—consistently make up a small percentage of total separations and do not generally rise or fall with economic trends.

The percentage distribution of the three separation types changed little throughout 2023, continuing the pattern observed in 2022. Starting in 2022, separations that were quits decreased while layoffs and discharges increased. During 2023, quits accounted for between 63 to 69 percent of total separations, while layoffs and discharges accounted for 26 to 31 percent. These distributions differ from 2022, when 68 to 73 percent of total separations were quits, and 21 to 27 percent were layoffs and discharges. However, the percentage of quits remains higher than prior to the pandemic, and the percentage of layoffs and discharges remains lower. In the 5-year period from 2015 through 2019, quits averaged 59 percent of total separations, and layoffs and discharges averaged 34 percent. Other separations made up 4 to 7 percent of total separations in 2023, which is similar to both before and after the COVID-19 recession. (See chart 4.)

Quits

Throughout 2023, the trends in quits—the largest component of total separations—drove the overall trend in separations. The number of quits between January and June stayed between 3.6 million and 4.0 million. Quits generally remained flat for most of the year and then declined to a low of 3.4 million in December.

Beginning in January 2023, job openings levels were trending down, while quits saw declines in their level beginning in June 2023. This downward trend for both generally continued to the end of the year. Job openings and quits levels began the year at 10.4 million and 3.9 million, respectively, and ended at 8.9 million and 3.4 million, respectively. Movements in these two data series are linked; as job openings increase, workers have more confidence to quit their jobs. As more workers quit their jobs, employers list more job openings. The relationship also works in the opposite direction. If there are fewer job openings available, workers are less confident in quitting their current jobs. When workers are quitting less, employers need fewer job openings to replace said workers. (See chart 5.)

Annual quits for 2023 totaled 44.4 million, compared with 50.5 million in 2022, a decrease of 6.1 million. This is the first time annual quits have decreased since the COVID-19 recession. In 2023, the annual average quits rate was 2.4 percent, declining from 2.8 percent in 2022.

Layoffs and discharges

Layoffs and discharges in 2023 declined in the first quarter from 1.9 million in January to 1.8 million in March. From April to December, layoffs and discharges oscillated between 1.5 and 1.7 million.

In 2023, the total number of layoffs and discharges was 19.8 million. This was an increase of 2.2 million from 2022 and represents a 12.3 percent increase in annual layoffs and discharge levels. In comparison, annual layoffs and discharges levels increased by 0.5 million from 2021 to 2022. The annual average layoffs and discharges rate was 1.0 percent for 2022 and 1.1 percent for 2023. Despite the rise in 2023 for layoffs and discharges, the levels and rates were below those prior to the COVID-19 recession. From 2015 to 2019, the annual layoffs and discharges level averaged 21.6 million, and the annual average layoffs and discharges rate ranged from 1.2 to 1.3 percent. (See table 1.)

Table 1. Total separation, quits, layoffs and discharges, and other separations 2021–23 annual averages (levels in thousands)

Separations	Level			Rate
	2021	2022	2023	2021	2022	2023
Total separations	68,916	72,245	68,060	3.6	3.9	3.6
Quits	47,608	50,529	44,386	2.5	2.8	2.4
Layoffs and discharge	17,064	17,622	19,783	0.9	1.0	1.1
Other separations	4,242	4,093	3,894	0.2	0.2	0.2
Note: Details may not sum to totals because of rounding. Source: U.S. Bureau of Labor Statistics.

Churn by industry

Churn, a measure of employment dynamics, is defined as hires plus total separations and represents the combined movement of employees into and out of a labor market. Because industries vary a great deal in size, it is useful to look at churn rates, defined as the hires rate (hires as a percentage of employment) plus the separations rate (separations as a percentage of employment). A higher churn rate can indicate high labor mobility within an industry, and a lower churn rate can indicate low labor mobility.

The industries with the highest churn rates in 2023 were arts, entertainment, and recreation (13.1 percent); accommodation and food services (12.8 percent); and professional and business services (9.3 percent). These three industries also had the highest rates of churn last year and are historically at or near the top in most years. However, the churn rates for the past 2 years have declined for these three industries. In 2022, the churn rates for these three industries declined by 0.5 percentage point, 1.7 percentage points, and 1.5 percentage points, respectively. The first two industries were within the leisure and hospitality industry, whose annual average job openings rate fell by 2.0 percentage points from 2022 to 2023. (See chart 6.)

Of the total separations in arts, entertainment, and recreation in 2023, 53 percent were quits, which was lower than the national average of 65 percent. Layoffs and discharges for the industry were 44 percent, higher than the national average of 29 percent. Of the three industries with the highest churn rates, accommodation and food services had the highest proportion of quits at 80 percent, compared with the national average of 65 percent.

The industries with the lowest churn rates in 2023 were in the public sector: federal government (2.8 percent); state and local government education (3.1 percent); and state and local government, excluding education (3.4 percent). Employees in the public sector tend to have the highest median years of tenure compared with workers in other industries.⁴

Notably, other separations accounted for 15 percent of total separations in the public sector, compared with 5 percent in the private sector. The federal government had the largest proportion of other separations, which include retirements. Of its total separations in 2023, 33 percent were other separations, compared with 5 percent for the national average. The federal government had a higher other separations rate than the nation overall (0.4 versus 0.2 percent) but the lowest quits, layoffs and discharges, and hires rates of any industry.

The hires-to-total-separations gap can help explain changes in an industry’s employment. When the hires level is greater than total separations, net employment is generally positive. Net employment is typically negative when total separations exceed hires levels.

The industry with the lowest hires-to-total-separations gap in 2023 was information (48 percent hires and 52 percent total separations). The information industry, which was affected by strike activity in 2023, saw an over-the-year decline in employment of 83,000 (-2.7 percent) in December 2023.⁵

The industry with the highest hires-to-total-separations gap was the federal government (54 percent hires and 46 percent total separations), which was the only industry where the annual average job openings rate increased in 2023. Notably, the federal government had the lowest hires-to-total separations gap in 2022, at 50 percent hires to 50 percent total separations. The change in the federal government hires-to-total-separations gap was due to a decline in total separations, as hires changed little from 2022 to 2023. In 2023, the federal government saw an over-the-year increase in employment of 85,000 (3.0 percent) in December 2023.⁶

Job openings by industry

Between 2022 and 2023, the annual average job openings rate decreased in nearly all industries, reflecting a cooling labor market. Slowed growth in job openings can indicate slowing establishment growth and reduced willingness to hire. The industry that saw the greatest decline in its job openings rate was information (-2.3 percentage points). This industry experienced considerable strike activity in 2023, which may have affected job openings. Only federal government saw its job openings rate increase from 2022 to 2023 (+0.7 percentage point).

The industries with the highest job openings rates were healthcare and social assistance (7.5 percent); accommodation and food services (7.2 percent); and arts, entertainment, and recreation (6.8 percent). These three industries are typically among those with the highest rates each year. Accommodation and food services and arts, entertainment, and recreation also are in the top three industries in terms of churn. (See table 2.)

Table 2. Job openings levels and rates, by industry, 2021–23 annual averages (levels in thousands)

Industry	Level			Rate			Rate change
	2021	2022	2023	2021	2022	2023	(2022 to 2023)
Total	9,986	11,187	9,351	6.4	6.8	5.7	-1.2
Industry
Total private	9,076	10,144	8,320	6.8	7.2	5.9	-1.3
Mining and logging	27	37	31	4.6	5.7	4.6	-1.1
Construction	345	399	384	4.4	4.9	4.6	-0.3
Manufacturing	820	846	613	6.2	6.2	4.5	-1.7
Durable goods	466	528	392	5.7	6.2	4.6	-1.6
Nondurable goods	354	318	221	7.0	6.2	4.4	-1.8
Trade, transportation, and utilities	1,800	1,792	1,465	6.1	5.9	4.8	-1.1
Wholesale trade	285	307	266	4.8	4.9	4.2	-0.7
Retail trade	993	966	723	6.1	5.9	4.4	-1.4
Transportation, warehousing, and utilities	523	520	476	7.8	7.3	6.8	-0.5
Information	177	224	144	5.8	6.8	4.5	-2.3
Financial activities	430	558	481	4.7	5.8	5.0	-0.8
Finance and insurance	313	393	346	4.6	5.6	4.9	-0.7
Real estate and rental and leasing	118	165	136	5.0	6.5	5.2	-1.3
Professional and business services	1,867	2,155	1,644	8.0	8.7	6.7	-2.0
Education and health services	1,788	2,170	1,925	7.0	8.2	7.1	-1.1
Private educational services	167	166	170	4.5	4.2	4.3	0.0
Healthcare and social assistance	1,621	2,004	1,755	7.5	8.9	7.5	-1.3
Leisure and hospitality	1,428	1,597	1,280	9.2	9.2	7.2	-2.0
Arts, entertainment, and recreation	175	186	184	8.1	7.5	6.8	-0.7
Accommodation and food services	1,253	1,410	1,096	9.3	9.5	7.2	-2.2
Other services	393	368	354	6.7	6.1	5.7	-0.3
Government	910	1,043	1,031	4.0	4.5	4.3	-0.2
Federal	132	137	163	4.4	4.6	5.3	0.7
State and local	778	905	868	3.9	4.5	4.2	-0.3
Education	303	331	306	2.9	3.1	2.8	-0.3
Excluding education	475	574	561	5.0	6.0	5.7	-0.3
Note: Details may not sum to totals because of rounding. Source: U.S. Bureau of Labor Statistics.

The industries with the lowest job openings rates in 2023 were state and local government education (2.8 percent), wholesale trade (4.2 percent), and private educational services (4.3 percent). Historically, state and local government education and wholesale trade generally have the lowest job openings rates. State and local government education was also in the bottom three industries in terms of churn.

Establishment size class (total private)

JOLTS produces estimates by six different size classes at the total private level. Each size class is determined by the maximum employment of an establishment over the last 12 months. In 2023, establishments with 10 to 49 employees and 50 to 249 employees accounted for almost two-thirds of total private employment. The largest size class (establishments with 5,000 or more employees) accounted for the smallest share of total private employment with less than 5 percent. On the other hand, the smallest size class (establishments with 1 to 9 employees) accounted for about 15 percent of total private employment. Understanding how the different size classes respond to changes in the economy can help economists to better understand the labor market.⁷ (See table 3.)

Table 3. Hires, total separations, and churn levels and rates, by size class, 2021–23 (level in thousands)

Size class	Total annual level			Annual average rate			Rate change
	2021	2022	2023	2021	2022	2023	2022 to 2023
Hires
Total private	71800	72002	66379	4.8	4.6	4.2	-0.5
1–9 employees	10602	10429	[1]	4.7	4.0	[1]	[1]
10–49 employees	21710	23096	[1]	5.0	5.5	[1]	[1]
50–249 employees	23370	23053	[1]	5.1	4.9	[1]	[1]
250–999 employees	10791	10345	[1]	4.7	4.2	[1]	[1]
1,000–4,999 employees	4478	4439	[1]	4.1	4.0	[1]	[1]
5,000 or more employees	705	912	870	2.7	3.5	2.1	-1.5
Total separations
Total private	64884	67753	64008	4.3	4.3	4.0	-0.3
1–9 employees	8926	9545	[1]	3.9	3.6	[1]	[1]
10–49 employees	19261	21796	21796	4.4	5.2	[1]	[1]
50–249 employees	21338	21630	21630	4.6	4.6	[1]	[1]
250–999 employees	10481	9831	[1]	4.5	4.0	[1]	[1]
1,000–4,999 employees	4478	4439	[1]	4.1	4.0	[1]	[1]
5,000 or more employees	631	754	702	2.4	2.9	1.7	-1.3
Churn
Total private	136684	139755	130387	9.2	8.9	8.2	-0.8
1–9 employees	19528	19974	[1]	8.6	7.6	[1]	[1]
10–49 employees	40971	44892	[1]	9.4	10.8	[1]	[1]
50–249 employees	44708	44683	[1]	9.7	9.4	[1]	[1]
250–999 employees	21272	20176	[1]	9.2	8.3	[1]	[1]
1,000–4,999 employees	8956	8878	[1]	8.1	7.9	[1]	[1]
5,000 or more employees	1336	1666	1572	5.0	6.5	3.7	-2.7
[1] Data are not available. Note: Churn rate equals the hire rate plus separation rate. Details may not sum to totals because of rounding. Source: U.S. Bureau of Labor Statistics.

In 2023, establishments with 1 to 9 employees had annual average hires, total separations, and churn rates of 4.0, 3.6, and 7.6 percent, respectively. By comparison, as in past years, establishments with 5,000 or more employees had the lowest annual average rates for hires at 1.9 percent, total separations at 1.5 percent, and churn at 3.5 percent. Large establishments tend to have fewer hires and separations during business downturns. A study by the Federal Reserve Bank of New York in 2011 suggested this may be due to their easier access to financial credit.⁸ This access to financial funds during an economic contraction may help larger establishments retain their employees rather than to lay them off.

State job opening and unemployment (total nonfarm)

The unemployed people per job openings ratio allows comparisons of those available for work and availability of jobs across states. In 2023, ratios for all states and the District of Columbia ranged from 0.5 to 1.2 compared with the 2022 range of 0.4 and 0.7. Most states saw increases in the ratio between 2022 and 2023, in line with the national trend of a steady increase. The ratio increased in 25 states and the District of Columbia, decreased in 14 states, and remained the same in 11 states. In 2023, the state with the highest ratio was Arkansas with 4.3 unemployed persons for every one job opening. Alabama had the highest ratio in 2022 but, at 0.3, joined the group of states with the lowest ratios in 2023. Other states with low ratios included Georgia, North Carolina, South Carolina, Utah, and Wisconsin. Wisconsin also had the lowest ratio the previous year in 2022 (0.4). (See chart 7.)

Conclusion

In 2023, job openings levels dropped considerably for the first time since the end of the COVID-19 recession. Annual hires decreased in 2023 for the first time since 2009. While quits represented the majority of total separations, the annual layoffs and discharges level increased, reflecting shifts in employer-initiated actions for separations. The fall in hires and rise in layoffs and discharges signaled a change in the labor market, which was reflected in an unemployment rate that increased in 2023. In summary, job openings and labor turnover data for 2023 described an economy characterized by slowing labor demand. 

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