Labor market churn is low

July 29, 2025

Job openings fell in June. There were 7.4 million jobs available at the end of the month, according to the latest Job Openings and Labor Turnover Survey (JOLTS). That was down from 7.7 million last month.

The monthly headline job openings data in JOLTS are akin to Isaac Newton's law of gravity: What goes up must come back down. These monthly fluctuations, however, obscure a stable trend in labor demand. On a three-month moving average basis, openings have remained within the range of 7.4 million to 7.8 million since June 2024.

There was nearly one job for every unemployed worker in June. That is below the average in 2019 but still suggests a labor market close to being in balance.

Job openings rose for the second month in a row in small businesses (firms with 1-49 employees). They are still down 3.9% year-to-date on a three-month moving average basis but that is better than the -8.4% last month. Small businesses are a microcosm of the overall economy in terms of resiliency in the face of tariffs, immigration and policy uncertainty. Any weakening in the months ahead would be a canary in the coal mine for the economy.

Healthcare and social assistance (-244,000) and leisure and hospitality (-264,000) posted the largest declines in job openings. The drop in healthcare and social assistance returned openings to the March level. Likewise, the accommodation and food services subsector shed 308,000 openings; that returned openings to the April level. These two sectors have played a key role in buoying job gains since mid-2023; cooling in job openings may portend a larger slowdown in the economy. Hence, the growing divide in views at the Federal Reserve about how weak the economy is and whether rate cuts are warranted.

Openings in the federal government were flat; state and local governments posted a gain of 49,000, largely due to job openings in education. That suggests payroll gains at the state and local level could offset declines at the federal level in July.

Most of the losses in federal employment to date reflect retirements amid a hiring freeze. Brace for a larger drop in federal employment at the end of the fiscal year, when those who took buyouts or were put on administrative leave are shed from payrolls. Recent layoffs across Washington, D.C. and in the field are starting to cumulate and will have spillover effects for the communities most dependent upon federal employment. Most federal employees work outside of Washington.

The hiring rate declined to 3.3% in June from 3.4% last month and remains well below the pace in 2019. On a three-month moving average basis, it has been 3.4% since September 2024. A 3.4% hiring rate overlapped with an unemployment rate of around 7% in the early 2010s.

Layoffs were flat at the historically low rate of 1%. They trended down in May and June, which is one of the reasons why initial unemployment claims have moved lower in recent weeks. A low level of layoffs has helped to keep a lid on the number of unemployed. The Conference Board's Index of Consumer Confidence revealed today that assessments of the labor market continued to weaken in July; it is running at levels not seen since 2017. The Indeed job postings for internships dropped to multiyear lows in recent months.

In professional and business services, job openings and layoffs rose while hiring and quits declined. Any increase in layoffs while hiring drops would lead to a rise in unemployment or a drop in participation in the labor market.

The quits rate was flat at 2% for the third straight month. The Labor Leverage Ratio, a proxy for worker bargaining power, edged lower as quits fell. According to the Federal Reserve Bank of Atlanta, job stayers have earned larger wage increases than job switchers since February. That is contributing to the lack of churn in the labor market and a hesitancy to job hop