Tenuous balance in the labor market

September 3, 2025

Job openings edged lower in July. There were 7.2 million jobs available at the end of the month according to the latest Job Openings and Labor Turnover Survey (JOLTS), down from 7.4 million in June.

On a three-month moving average basis, openings have remained within the range of 7.4 million to 7.8 million for over a year. The ratio of job openings to unemployed job seekers, a measure of balance in the labor market tracked closely by Federal Reserve officials, was flat at 1.0, reflecting a relatively stable labor market.

Real-time data from Indeed Hiring Lab show that advertised job postings fell in the first half of July but rose in the second half. Postings rose slightly in August. Labor demand has remained steady at the same time that labor supply has fallen due to the shift in immigration policy and an increase in retirements. Together, those factors are keeping unemployment low.

The number of actual job openings flattened out among small businesses (firms with 1 to 49 employees) in July. They are still down 5% compared to the end of 2024, but that is an improvement from -8.4% in May. Risks remain to the downside.

Job openings declined in the three sectors that have driven employment growth during the last two years. Healthcare and social assistance posted a loss of 181,000, leisure and hospitality dropped 47,000 and state and local government fell 56,000. There is weakness in the care economy despite surging demand owing to an increase in births and aging demographics; immigrants comprise a large share of the workforce for both childcare and eldercare.

Federal government openings increased by 18,000 in July. A surge in hiring in Customs and Border Protection could make up for the over 150,000 workers who took buyouts and will no longer be on payrolls in October.

The overall hiring rate stayed flat at 3.3% in July. The monthly data are noisy. Three-month moving averages are more reliable to assess trends. The hiring rate fell to 3.3% from 3.4% on a three-month moving average basis. It had been 3.4% for nearly a year.

That marks a further deterioration in hiring that is already showing up in the unemployment data. The average time unemployed has increased and the long-term unemployed (27+ weeks) as a share of the labor force has risen. That tends to happen when the economy is already in a recession.

Low hiring continues to be offset by low layoffs. The layoff rate came in flat at 1.1%. Quits remained unchanged at 2%. The Labor Leverage Ratio, a proxy for worker bargaining power, flattened out in July with both quits and layoffs unchanged.

Workers who stay in their jobs are continuing to earn larger wage increases compared to those who change jobs, according to the Federal Reserve Bank of Atlanta. This is contributing to the lack of churn in the labor market.