Labor market remains stable

July 7, 2025

Job openings rose in May. There were 7.8 million jobs available at the end of the month, according to the latest Job Openings and Labor Turnover Survey (JOLTS), up from 7.4 million last month.

On a three-month moving average basis, openings have remained within the range of 7.4 million to 7.8 million since June 2024. The jump in May could also be revised down next month.

Real-time data from Indeed Hiring Lab show that advertised job postings continued to decline in June. They are now down more than six percentage points year-to-date. The decline has been gradual, however. Labor demand is weakening but it has not collapsed.

Job openings increased by 341,000 in small businesses in May (firms with 1-49 employees). That reverses the downward trend to start the year. Year to date, openings have still fallen by 7.8% in small businesses on a three-month moving average basis; they are up 0.9% in medium businesses and 2.4% in large businesses. Hiring also ticked up on a three-month moving average basis in small businesses. They are weathering the storm from uncertainty, tariffs and immigration policy. Risks remain to the downside the second half of this year.

Accommodation and food services posted the largest monthly gain in job openings (+314,000). The monthly number is volatile, however. That helped overstate the headline job openings number. Openings fell the most in retail (-71,000). Consumer spending adjusted for inflation fell in May. That could further hit this industry over the next several months.

Job openings declined by 39,000 in the federal government in May. There were only 89,000 job openings at the end of the month; that is the lowest number since May 2020. Openings rose by 40,000 in state and local government. Many federal workers may be moving into state and local government jobs. This may slow in the second half of the year as states face budget shortfalls.

The ratio of job openings to unemployed job seekers, a measure of balance in the labor market, tracked closely by Federal Reserve officials, ticked up to 1.1 from 1.0. That reflects a labor market in balance.

The hiring rate ticked back down to 3.4% in May from 3.5% in April. On a three-month moving average basis, it has been flat at 3.4% since September 2024. The professional and businesses services industry reflects the largely static labor market. In May, job openings, hiring and layoffs slightly ticked down, while quits were flat.

Low hiring rates continued to be offset by historically low layoffs. The layoff rate edged down to 1% from 1.1%. Companies are wary of laying off workers after struggling to hire during the post-pandemic labor market surge.

The quits rate ticked up to 2.1% in May from 2%. That marked an improvement from the beginning of the year when the rate was 1.9%. That is still below the pre-pandemic benchmark average of 2.3%. The Labor Leverage Ratio, a proxy for worker bargaining power, rose in May. That was due to rising quits and declining layoffs.

According to the Federal Reserve Bank of Atlanta, job stayers are earning larger wage increases than job switchers. That is a reversal from the usual relationship. That suggests wage growth will continue to moderate in the months ahead