The Fed vs. the Job Market: Why the Latest JOLTS Report Green-Lights Interest Rate Cuts

The latest jobs report just dropped—the JOLTS report. And this month’s data suggests the job market is finally taking a mild sedative. But will this newly chill labor market alter the Federal Reserve’s plan to continue with interest rate cuts? The short answer is no.

The Fed has been walking a tightrope, trying to cool down inflation without cratering the economy. The October JOLTS data provides compelling evidence they might just stick the landing.

Illustration of a jumbo jet being parallel-parked, symbolizing an economic soft landing.

A Look at the October JOLTS Report

Released by the U.S. Bureau of Labor Statistics, the JOLTS report shows a job market that’s still lively but is starting to cool its jets.

Job Openings: Leveling Off

Job openings held steady at just under 7.7 million. While high by historical standards, this figure is a significant step down from the hiring frenzy we saw just a few months ago. This is precisely the outcome the Fed’s rate hikes were designed to achieve—a softening, not a collapse. This is the “soft landing” economists have been hoping for, and it looks like the jumbo jet is being parallel parked flawlessly.

Line graph showing a downward trend, illustrating the falling worker quits rate.

The Quits Rate: The “I’m Outta Here” Index

The “quits rate,” which measures worker confidence, fell in October. This suggests employees are becoming more cautious, holding onto their jobs like they’re the last roll of toilet paper in March 2020. This decline in churn is a clear signal to the Federal Reserve that the labor market is calming down, giving them the green light for more accommodating policy.

Layoffs: A Minor Tremor

The report also noted a fractional uptick in layoffs—not enough to cause alarm, but another subtle hint that companies are tightening their belts. The trend is what’s crucial, and it’s pointing toward a gradual, controlled cooling of the job market.

Ship captain steering a large vessel away from a storm, representing the Fed's proactive policy.

Why the Fed Is Justified in Cutting Rates

With the job market solid but no longer overheated, why did the Fed recently start cutting rates and why are they poised to continue?

A defeated beast labeled 'INFLATION' being led away by a figure representing the Federal Reserve.

Inflation Is (Still) the Primary Target

The Fed’s main job is to keep prices stable. With recent reports showing inflation is finally getting tired, the central bank can ease its grip on the economy. Having wrestled the inflation beast, the Fed is now pivoting to ensure the village is still standing.

The “Lag Effect” of Monetary Policy

The Fed knows the full impact of its past rate hikes has yet to be felt. They’re acting proactively to avoid oversteering the economy into a recessionary iceberg. By initiating interest rate cuts now, they can keep the ship sailing smoothly.

Global Economic Headwinds

Other major economies are slowing, and that slowdown can easily spill over. By cutting rates, the Fed provides the U.S. economy with a buffer, helping to calm the choppy waters of the global financial sea.

The Bottom Line

The October JOLTS report is another key piece of evidence that the labor market has taken a chill pill without passing out. This is good news, strongly supporting the much-prayed-for “soft landing” scenario.

With inflation finally getting the memo and the global economy looking uncertain, the Federal Reserve is locked and loaded to continue with interest rate cuts. For consumers and businesses, this signals that the people in charge are confident they can stick the landing and steer the economy toward stable growth.