Job openings diminished in July

August 16, 2024

Total job openings in the United States remained flat at 8.2 million in June. This is above the pre-pandemic baseline average of 7.2 million but reflects the steady reduction in openings since the peak of 12.2 million in March 2022. Additional slowing in job openings in the months ahead would signal a weakening labor market.

Job openings largely remained flat in most states. The largest gains month-over-month occurred in New York (+39,000), Arizona (+33,000) and Texas (+30,000). California posted the most losses at -54,000, followed by New Jersey with -31,000. Only nine states reported a higher quarterly average of job openings in the second quarter of 2024 compared to the first quarter of 2024. This is clear evidence of broad cooling in the labor market.

Real-time data from Indeed show that job postings in several large states have started to rise again since late May. Postings remain 20% above the pre-pandemic average in Georgia, North Carolina and Texas. Though postings are below the pre-pandemic averages in California and New York, they are on an upward trend. That is good news for the labor market as it shows resiliency in the face of economic uncertainty.

The ratio of job openings to unemployed job seekers, a measure of balance in the labor market tracked closely by Federal Reserve officials, remained flat in June at 1.2 for the third straight month. The ratio has actually ticked up quarter-over-quarter in 16 states, though in many the difference is a matter of rounding. Arizona posted the largest gain, from 1.1 to 1.4. Maryland went from 2.6 to 1.9, Ohio from 1.4 to 1.0 and Colorado from 1.8 to 1.5, as demand for labor cooled in those states.

Increases in the unemployment rate at the national level have triggered the "Sahm rule," an early recession predictor. At the state level, from July 2023 to July 2024, the unemployment rate increased in 43 states (including Washington, DC), decreased in five states and stayed flat in three states. It increased the most in Rhode Island (+1.8 percentage points), Ohio (+1.1) and South Carolina (+1.1).

Like job openings, hires changed little in most states. Consistent with the openings data, hires declined the most month-over-month in California (-71,000). They increased the most in Colorado (+22,000) and New York (+18,000), which should help bolster these markets.

The relatively low number of layoffs has helped soften the blow from the low number of hires. Month-over-month, layoffs declined in Florida (-52,000), California (-46,000) and Colorado (-28,000). Even though job postings and hires declined in California, so did layoffs. Fed officials will be tracking closely the extent to which hires continue to drop and/or layoffs start to trend upwards. That would result in the rise in unemployment they are seeking to avoid.

Quits did not change much in most states, though they remained below the pre-pandemic average overall. Bucking the national trend, the quits rate increased from 2.2% to 2.7% in Texas month-over-month. That may signal worker confidence in the state's labor market.

ADP data show that the wage premium for switching jobs declined to 7.2% in July. That is the lowest rate since May 2021. It reflects the reduced incentive for changing jobs, which is seen in the below-benchmark quits rates. Workers are largely staying put in a job market that has softened but not yet seized.