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The Job Market Boom Is Over. Here’s Why and What It Means

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The Job Market Boom Is Over. Here’s Why and What It Means

Cooling demand for workers could help achieve a soft landing—lower inflation without a recession

Nonfarm payrolls, change from a month earlier

By Sarah Chaney Cambon Rosie Ettenheim, WSJ

Sept. 9, 2023 5:30 am ET

The pandemic-driven hiring frenzy is ending.

For months after the end of Covid-19 restrictions, employers faced widespread labor shortages as the economy quickly rebounded. Businesses tried to lure workers with bigger wages and signing bonuses. Help-wanted signs lined main streets.

Now, companies are hiring more slowly and reducing job postings as higher interest rates weigh on economic demand. More workers, including women, immigrants and Americans with disabilities, are flowing into the labor force, helping businesses fill open roles.

Some economists think the labor-market cool-down points to a so-called soft landing, in which inflation falls without the economy entering a recession. Rising labor-force participation should help cool wage growth—and in turn take pressure off the Federal Reserve to raise interest rates further to reduce inflation by slowing the economy.

The job market—and overall economy—could still weaken significantly before inflation reaches the Fed’s target of 2%. But as hiring cools and inflation eases, chances are rising that the economy might dodge such a severe downturn.

Prior to the pandemic, job openings ran slightly above unemployment .

Unemployment skyrocketed when the pandemic hit. It quickly fell when businesses reopened.

Then job openings surged to historic highs and stayed elevated.

Job openings started to fall as the Fed raised interest rates to combat high inflation. Unemployment remained low but recently ticked up.

Employers pull down job postings

Overall job openings, a reflection of labor demand, peaked at 12 million in March 2022, about double the number of unemployed people looking for work the same month. That gap has since narrowed. Openings in July were much lower at 8.8 million compared with 5.8 million unemployed—showing easing but still elevated demand for labor.

Professional and business-services providers—which include many white-collar jobs in accounting, law and consulting—have sharply reduced job postings. Manufacturers and retailers have also cut back on openings, after seeking workers earlier in the pandemic to meet surging consumer demand for goods such as bikes, furniture and sweatpants.

Restaurants, hospitals and nursing homes, which struggled to staff up amid pandemic reopenings, have also reported fewer job openings over the past year-and-a-half. More workers started looking for jobs, helping these companies backfill positions they cut at the pandemic’s onset.

In another sign of the cooling labor market, job growth in August logged in just above its 2019 prepandemic average, with revisions showing payroll gains below the average the prior two months.

More people are looking for work as pandemic-related disruptions fade and employers dangle bigger paychecks. Americans between 25 and 54 years of age are employed or looking for jobs at historically high rates, helping counter the exodus of older baby boomers from the workforce.

Women are driving the charge. The lure of higher pay, adoption of remote work and high inflation are spurring more women to seek jobs after daycare and school disruptions during the pandemic drove many to the sidelines.

More foreign-born workers are jumping into hard-to-fill jobs at restaurants, amusement parks and nursing homes, as pandemic-era immigration restrictions ease.

Labor-force participation among individuals with disabilities also is surging as the tight labor market and flexible work options provide new job opportunities.

Wage growth eases and now outpaces inflation

Wage growth is cooling as employers face less competition for workers. If more Americans hop into the labor force in the coming months, pay gains could slow further.

Still, earnings growth is running above its prepandemic pace and recently outstripped inflation. That puts more money in workers’ pockets, helping fuel spending. But it also threatens to keep inflation elevated.

Write to Sarah Chaney Cambon at and Rosie Ettenheim at

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