How job openings in the US cooled—without a spike in unemployment

There are growing signs that overheated job markets in the U.S. and other developed economies are cooling, according to Goldman Sachs Research. The surprise is that labor markets are rebalancing, at least so far, without a spike in unemployment or setting off a recession.

In the U.S., the job openings rate has fallen by more than 1.5 percentage points from its peak while the unemployment rate has actually crept slightly lower, Goldman Sachs economist Joseph Briggs writes in the team’s report. Other major economies like Canada and the U.K. have shown a similar pattern of declining job openings while unemployment rates stay low.

The “Beveridge Curve” is a way to visualize that relationship between unemployment and job openings. The curve is rotating inwards in a number of economies, as the rate of job openings declines but so does joblessness. Not all economists expected that to happen — or even thought it was possible, Briggs writes.

Economic theory suggests movements in the Beveridge curve reflect two main types of changes:

• If the process of matching unemployed workers with open positions becomes less efficient, the Beveridge curve shifts outward, since more unemployed workers are needed to generate hiring no matter the level of job openings.
• As the labor market gets tighter (reflecting a higher level of job openings relative to unemployed workers), the economy moves up along the Beveridge curve.

Whether the Beveridge curve can shift inward without a rise in unemployment depends on whether job matching can become more efficient. If so, that implies a larger decline in the job openings rate and a smaller increase in the unemployment rate.

Last summer, our economists argued that the surge in job openings — and large outward shift in the Beveridge curve — was mainly driven by a sharp drop in the share of unemployed workers actually applying for jobs during the pandemic, as well as employers that were over-estimating their hiring needs because the pandemic had distorted demand for their offerings. This argument implied that the Beveridge curve would shift inwards as “search intensity” recovered and economic conditions came back to normal.

Recent data suggest those predictions have played out. The decline in job openings in the U.S. has occurred alongside a continued recovery in search intensity, as the share of unemployed workers applying for jobs and the number of search methods (such as contacting potential employers, responding to ads, contacting friends or relatives) used by unemployed workers have both increased of late, according to Goldman Sachs Research. Data from LinkedIn suggest that the number of applications per job searcher have increased by 26% in the U.S. relative to last year and by more than 20% in most developed-market economies.

International data also suggest labor market dynamics are getting back to normal, which has contributed to recent declines in job openings (and inward shifts in the Beveridge curve), according to Goldman Sachs Research. In particular, job openings have declined more in places where the job openings rate overshot the most in 2021 and 2022, as well as in economies where job search intensity — measured using the change in the number of applications per job searcher — has increased the most.

Based on their forecasts for continued economic expansion — but at a pace that’s below potential — our economists expect these trends to continue: Job openings are predicted to fall further and the Beveridge curve may shift inwards in most developed economies.

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