Bit by bit, the US labor market is settling down from the rolling boil of the past three years: The number of job openings dipped to its lowest point in more than two years, according to data from the Bureau of Labor Statistics released on Tuesday.
The latest job turnover report for the month of June showed that the number of available positions dropped for the second consecutive month, falling to a seasonally adjusted 9.582 million, or 1.6 jobs per job seeker, roughly in line with expectations.
That’s just below May’s downwardly revised 9.61 million total, and represents a stark pullback from the 12 million plus open jobs seen in March 2022, according to the BLS’ Job Openings and Labor Turnover Survey report.
It’s yet another economic data point that’s moving in the right direction for Federal Reserve officials who have hiked the central bank’s benchmark interest rate 11 times since last March, bringing it to the highest point in 22 years. In doing so, they hope to squelch demand — make houses and cars harder to buy, make investments more costly — and take some of the heat off inflation without crushing the labor market and hurling the economy into a recession (the elusive “soft landing”).
“It is looking like a soft landing, but the problem is that we won’t know whether this is a soft landing or whether conditions continue to weaken further and we get a recession four or five months from now,” Gus Faucher, an economist with PNC Financial Services, told CNN. “Both a recession and a soft landing look like this.”
The pressure is coming off
On a monthly basis, the June JOLTS report also showed that the number of new hires dipped to 5.91 million from 6.23 million, quits peeled back to 3.722 million from 4.067 million, and layoffs inched down to 1.527 million from 1.546 million.
Job openings increased in industries such as health care and state and local government, excluding education, where postings fell. Job openings also dropped in industries such as transportation, warehousing and utilities and the federal government.
“Job openings fell to their lowest level since April 2021, but there is still a large gap between the long-term average level, or one consistent with slack in the labor market,” wrote Oxford Economics economists Matthew Martin and Ryan Sweet in a note issued Tuesday. “Further, while the quits rate fell, the measure is quite volatile, and is still at a level that indicates continued pressure on wages as many workers leave jobs in search of other (higher-paying) opportunities.”
In June, hires fell to their lowest level since before the pandemic; however, other labor turnover metrics remain farther afield of their pre-pandemic levels: In February 2020, openings were just shy of 7 million, quits were 3.49 million and layoffs were 1.968.
“The latest JOLTS report bolsters the prospect that the Fed can tame inflation without inducing carnage in the labor market,” Wells Fargo economists Sarah House and Michael Pugliese wrote in a note issued Tuesday.
Demand is easing
With the quit rate falling back to 2.4%, a tick above where it was before the pandemic, that helps ease pressure on wages, they wrote. And while unemployment has been moving sideways for much of the past year, the downward trend in openings indicates that could change.
The drop in job openings points “to ongoing softening in demand, which is likely to make it harder to maintain the effectively flat trend in the unemployment rate unless the supply picture weakens,” House and Pugliese wrote. “And while the Fed has made progress in lowering inflation, a sustained return to [its target rate of] 2% is yet to be achieved and suggests that declaration of a ‘soft landing’ remains premature, in our view.”
The Fed’s benchmark inflation gauge, the core Personal Consumption Expenditures index, measured 4.1% in June, the Commerce Department reported last week.
Separately on Tuesday, two other economic reports showed a slowing in demand: A closely watched gauge of manufacturing activity showed contraction for the ninth consecutive month and construction spending for June was unchanged.
“The latest data are consistent with an economy that is experiencing below-trend growth that is just slow enough to bring the inflation rate down without engendering an outright recession that adds millions to the nation’s unemployment lines,” Chris Rupkey, chief economist with FwdBonds, wrote in commentary issued Tuesday.
Even more critical data will land later this week when the BLS release its monthly jobs report for July on Friday morning.
