Job openings have leveled off

July 30, 2024

There were 8.2 million total job openings in June. That was unchanged from an upwardly revised May estimate. Openings have plateaued during the past several months after a steady decline from the 12.2 million peak in March 2022.

Real-time data from Indeed Hiring Lab show that job postings have generally plateaued since mid-May at a level a bit more than 10% above the pre-pandemic average. That is good news for the labor market. It shows that openings have remained steady even as they have cooled from pre-pandemic highs.

Job openings slightly decreased in the private sector overall. Goods-producing industries led the declines, including durable goods manufacturing (-88,000), construction (-71,000) and nondurable goods manufacturing (-11,000). Wholesale trade (+47,000), retail trade (+43,000) and transportation, warehousing, and utilities (+62,000) helped power the gains. Discounting led to a surge in demand in June, helping support these industries. The largest monthly gain occurred in accommodation and food services. The increase of 120,000 helped recoup, but not totally recover, losses suffered in May. The need to discount further to boost waning consumer demand is a headwind for this industry in the months ahead.

Openings nudged slightly higher in the public sector. They declined by 62,000 in federal government but increased by 94,000 in state and local government, excluding education. Budget shortfalls in the new fiscal year in several states could dampen openings for the rest of 2024.

The ratio of job openings to unemployed job seekers, a measure of balance in the labor market tracked by Federal Reserve officials, remained flat at 1.2 for the third straight month. That was roughly equal to the pre-pandemic average. Any decline in the ratio, whether due to a decline in openings or increase in the ranks of the unemployed, would be concerning to the Federal Reserve.

The hiring rate declined to 3.4% in June from 3.6% in May. That is now below the average hiring rate of the previous two economic expansions in the US from 2001-2007 (3.8%) and 2009-2020 (3.5%) when the average unemployment rate was one to two percentage points higher than it is today. That is a worrisome signal that the labor market may be weakening.

Total hires were roughly flat in the public sector, while they declined by 308,000 in the private sector. Hires decreased by 115,000 in professional and business services, where companies are rebalancing their workforces, especially with the expansion of GenAI services. Hires also fell by 111,000 in accommodation and food services. The increase in openings could signal a rebound for an industry that has been hit hard by American consumers' inflation fatigue.

The quits rate remained flat in June at 2.1%. That is below the 2019 baseline average rate of 2.3%. Workers are staying put in their jobs in this uncertain labor market. Data from ADP Pay Insights show that wages for job changers ticked down to 7.7% in June. The ratio of job changers to job stayers, a proxy for the incentive to quit and seek a new job, remained at 1.6 in June 2024 for the third month in a row. That was down from highs in late 2021 and early 2022. That showed both the continued cooling of wages and the reduced incentive to change jobs, as reflected in the lower overall quits rate.

The lower hires rate is less worrisome given that the layoffs rate ticked down, to 0.9% in June from 1.1% in May. After an increase in layoffs of 65,000 in professional and business services in May, layoffs declined by 30,000 in June. That signals the industry may be stabilizing while companies rebalance their workforces. The Labor Leverage Ratio, a proxy for worker bargaining power, ticked up in June. That was due to a decline in layoffs.