The U.S. labor market is showing signs of cooling off. Job openings went up slightly in May to 8.1 million. This was despite the Federal Reserve’s efforts to slow the economy with higher interest rates.
Job openings per unemployed worker remained at 1.2 for the second month in a row in May. That is what they were just prior to COVID. pic.twitter.com/txW51CvkhU
— Jason Furman (@jasonfurman) July 2, 2024
In April, job openings had dipped below 8 million for the first time since early 2021. The Labor Department reported the May increase on Tuesday. Layoffs also rose in May to 1.65 million.
In post-pandemic world, there have been larger gaps between first release and revision for JOLTS job openings data … lately, revisions have been to downside (a reversal of trend in 2021-2022) pic.twitter.com/QR2nPgwFv3
— Liz Ann Sonders (@LizAnnSonders) July 3, 2024
This was up from 1.54 million in April. However, the number of Americans quitting their jobs stayed about the same. “The report was another sign that the labor market is holding firm,” said Robert Frick, an economist.
Hires rate ticked up in May and looks to be stabilizing around current level, which would be welcome since year/year change is still negative pic.twitter.com/JK8U59FBsn
— Liz Ann Sonders (@LizAnnSonders) July 3, 2024
He added, “The expansion looks solid.”
The Fed has raised rates aggressively to fight inflation. It has increased its key rate 11 times since early 2022. The rate is now at a 23-year high.
The economy has still managed to keep growing. Employers have also continued to hire. But there are indications that growth is slowing down.
Job openings grow despite Fed efforts
Job openings have fallen steadily since hitting a record high of 12.2 million in March 2022. There are now about 1.25 jobs available for each unemployed person.
This is down from a 2-to-1 ratio at the start of 2023. The Fed sees the decline in job openings as a way to cool the hot job market. It hopes this will ease pressure on companies to raise wages, which can fuel inflation.
From January to March, the economy grew at just a 1.4% annual rate. This was the slowest pace since spring 2022. Consumer spending has also shown signs of slowing.
Economists expect a government report on Friday to show that hiring slowed in June. They predict employers added 190,000 jobs, down from 272,000 in May. The unemployment rate is forecast to stay low at 4%.
Inflation has come down from a 40-year high last summer to the Fed’s 2% target. The Fed is expected to start cutting rates, possibly as soon as September. Fed Chair Jerome Powell said Tuesday that more evidence of improvement is needed before rate cuts will be considered.
He noted that progress on lowering inflation had stalled earlier this year.
