The U.S. job market is showing signs of cooling as high interest rates take effect, according to the latest Job Openings and Labor Turnover Survey (JOLTS) report from the Labor Department. In June, job openings fell slightly to 8.2 million, down from previous months but still higher than the expected 8 million. Despite the slight decline in job openings, other indicators point to a slowing job market.
Employers hired 5.3 million people in June, the fewest since April 2020 when the pandemic severely impacted the economy. The number of people quitting their jobs, usually a sign of confidence in finding better opportunities elsewhere, dropped to 3.3 million, the lowest since November 2020. However, layoffs also decreased to 1.5 million, the lowest since November 2022, suggesting that employers are reluctant to let go of staff.
Job vacancies increased in sectors such as hotels, restaurants, and state and local governments (excluding schools) but decreased in factories producing long-lasting manufactured goods and at the federal government.
Job market shows signs of cooling
The U.S. economy and job market have demonstrated remarkable resilience despite the Federal Reserve’s aggressive campaign to curb inflation by raising its benchmark interest rate to a 23-year high.
While job openings have steadily declined from their peak of 12.2 million, the current 8.2 million is still a strong number, as monthly job openings had never exceeded 8 million before 2021. Economists view the drop in vacancies as a relatively painless way to cool the job market and reduce pressure on companies to raise wages, which can contribute to inflation. Job growth has also slowed, with employers adding an average of 222,000 jobs per month so far this year, down from an average of 251,000 last year, 377,000 in 2022, and a record 604,000 in 2021.
The Labor Department is set to release July numbers on job creation and unemployment on Friday. Forecasters predict that the economy likely created 175,000 jobs in July, down from 206,000 in June, with the unemployment rate expected to remain at a low 4.1%. The Fed is widely anticipated to leave interest rates unchanged at its meeting this week but may consider cutting them at its next gathering in September.
