Heidi Shierholz, Economic Policy Institute Senior Economist and Director of Policy, joins Yahoo Finance Live to discuss JOLTS data and the shifts taking place in the labor market.

Video Transcript

AKIKO FUJITA: Well, bad news for the economy continues to be good news for the market, and you see all green arrows across the board today. Today's JOLTS, or Job Openings and Labor Turnover Survey, showing open jobs in the US dropping by 10%.

This number has been elevated at levels for some time. Any signs of slowdown would enhance speculation over a Fed pivot. It comes ahead of Friday's jobs report. Expectations are for a rise of 250,000 jobs in September. Markets will be laser focused on wage growth and any sign it's starting to cool meaningfully.

Let's bring in Heidi Shierholz. She's Economic Policy Institute senior economist and director of policy. Heidi, good to talk to you today. Walk me through your read on the number that we got today. A lot of people saying, look, is this a sign that the Fed policy is finally taking hold?

HEIDI SHIERHOLZ: With the caveat that one month never makes a trend, right? These numbers are volatile, month to month. But this was a big drop in job openings. 1.1 million in August. It's on top of drops that we've seen since their peak in March. If you look since the peak in March, job openings had dropped by over 15%. So we really are seeing this sort of longer run slowing and dramatic slowing at the end of the summer. So it does, to me, really read that this slowing in churn in the labor market is happening.

But if you look back, we know that we added jobs in August. There was net job growth 'cause we already had those numbers. And so this combination of slowing churn and net job growth is actually really good. If we can-- because that slowing churn, that will slow wage growth. We know that one way-- a key way that workers see wage growth is by actually changing jobs and getting a job where they're paid more. That's happened a ton in this recovery.

We do want workers to see real wage growth. But since we know the Fed is really watching what's happening with wage growth right now, this will be a sign to them that we are seeing-- the thing that really boosts wage growth, one thing is job openings because workers can move to other jobs where they make more money. And so, this will be a good sign to them that what they're doing is working. And hopefully, it will mean that they do not take as aggressive action going forward.

AKIKO FUJITA: And so, Heidi, with that caveat in place that you pointed to, we don't want to make too much of just one economic report here. We've got the jobs report as well. But that slowing churn you just highlighted, is that happening at a rate that is consistent with the soft landing that the Fed would like to see?

HEIDI SHIERHOLZ: So far, yes, but we're really early on. We know that when the Fed raises rates, the impacts are not immediate. It takes a while for that to sort of play out. And it's a blunt tool. But so far, we are seeing strong employment growth. And you said this at the top, but that we're expecting and when we get the September numbers out on Friday that we will have added quarter of a million jobs in September. That is slower growth than what we have been seeing, but it's still solid growth.

So at this point, signs are pointing to slowing churn. That's good because that will reduce this very high wage growth that we're seeing right now. Again, we want workers to have strong wage growth. But right now, the Fed is looking so closely at that. It's good to see that moderating.

And so that slowing churn, while we're still having reasonably strong net job growth, that's the sweet spot. That's what we want. So we really want to hang on to it. And it's actually really hard to tell right now just how long we'll hang on to that, if that will start to look a little darker or not.

AKIKO FUJITA: Heidi, one of the things we've been following closely is this push towards unionization of workers. In many ways, you could argue that has gained momentum because of the tight labor market. Employees feeling like they are in a stronger position to seek leverage. Where do you think that goes as we start to see a softening in the labor market?

HEIDI SHIERHOLZ: That's a really good question. It's not good for worker power sort of writ large. I think it's useful, a framework for thinking about what power workers have. It really does boil down to two sources. One is if you're in a union, then you have the joining together with your coworkers to make collective demands. There's power there. And then the other source of power that workers have is that the implicit threat that they could quit their jobs and take another job.

And that threat has actually been very real in this recovery, realer than it has been in recent years, where we've seen workers actually quitting their jobs and taking better jobs sort of left and right. If and when the labor market softens, if we-- and particularly, if we start to see unemployment rise, that second source of power, the threat that you may quit your job and take another job, that really, really shrinks. So the extent to which employees see that better leverage because their employers know that they can take another job elsewhere, that really goes away when the labor market softens.

The other source of power-- workers joining together with their coworkers to make collective demands-- that's not necessarily going to dry up, even if the unemployment rate rises, right? I think we have been in a period of workers really newly recognizing the power in joining together with their colleagues, with their coworkers, to make collective demands. And that really could be something of a structural shift, like, sort of a lesson learned that won't just dry up if the unemployment rate rises. But all of this sort of remains to be seen.

AKIKO FUJITA: Yeah, it certainly feels like the issue isn't going away anytime soon. Heidi, good to have you on today. Heidi Shierholz, Economic Policy Institute senior economist and director of policy.