Private sector powers May JOLTS

July 8, 2024

There were 8.1 million total job openings in the US in May. Though that is slightly above the downwardly revised 7.9 million total for April, it is still well below the 12.2 million peak in March 2022. Real-time data from Indeed Hiring Lab show that job postings have plateaued after declining in April and May. Further declines could signal a weakening labor market.

Job openings were slightly higher in the private sector in May. Gains in durable goods manufacturing (+97,000), healthcare and social assistance (+78,000) and professional and business services (+44,000) were nearly offset by losses in accommodation and food services (-147,000), private educational services (-34,000) and real estate and rental and leasing (-32,000). The drop in accommodation and food services could point to a slowdown in demand in the leisure and hospitality sector as Americans alter their spending decisions due to the inflationary environment.

Public sector job openings grew largely due to the 117,000 increase in state and local government employment, excluding education. Several states are moving into the new fiscal year 2025 with budget deficits, which could result in slower growth in openings in the second half of the year.

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 in May. The ratio has cooled substantially in recent months and is just a touch above the 2019 baseline average.

Total hires and the hiring rate ticked up slightly in May, reaching 5.8 million and 3.6% respectively. Public sector hires changed little in May; private sector hires powered the gains. Professional and business services increased by 113,000. After entering correction territory in 2023 with strong gains in 2021 and 2022, both hires and job openings are on the rise in that industry.

Besides construction, several other goods producing industries recorded a drop in hiring during May. That contrasted with gains the month before. The labor market will be more vulnerable if hires are not more broad-based in the upcoming months outside of the three sectors that have driven employment gains since mid-2023: healthcare and social assistance; leisure and hospitality; and state and local government.

The quits rate remained at 2.2% for the seventh month in a row. That is slightly below the 2019 baseline average of 2.3%. Quits declined by 61,000 in accommodation and food services, showing the tight conditions in that sector. Quits increased by 32,000 in professional and business services, suggesting conditions are becoming looser. Data from ADP show that the wage premium for switching jobs ticked down to 7.7%. That is the third-lowest figure since May 2021. The reduced incentive to change jobs could reflect less optimism about the labor market as it continues to cool and concerns grow about a broader weakening.

Similar to quits, the layoffs rate remained flat at 1% for the third straight month. Layoffs changed little in both the public and private sectors. An increase of 71,000 in professional and business services, at the same time as job openings and hires have increased, suggests that the sector is rebalancing by shedding jobs in some divisions while hiring in others. This could be partially to meet demand for generative AI services. The Labor Leverage Ratio, a proxy for worker bargaining power, slightly declined month-over-month and remains just above the 2019 baseline average. That suggests the job market is still relatively favorable for employees, though a drop in quits or a rise in layoffs could alter that balance.