For the past year, America has had a glut of open jobs. Restaurants, airlines and retail stores have raced to recruit enough people to meet a surge in demand, dangling sign-on bonuses and more attractive wages. Time after time, they've come up short.
But as the US economy slows down, the dynamics are beginning to shift. Job openings dropped to 10.7 million in June from 11.3 million in May, according to data released this week. That's the lowest level since September 2021.
"Job openings still need to fall by 3.7 million to get back to their February 2020 pre-pandemic level, but June's print shows they are now coming down at the fastest rate since the start of the pandemic crisis," Jessica Rabe of DataTrek Research said in a note to clients.
Why it matters: America's economic output has contracted for two quarters in a row, meeting one technical definition of a recession. But policymakers like Federal Reserve Chair Jerome Powell have pointed to the strong job market as evidence that a recession isn't really underway — at least not yet.
"There are just too many areas of the economy that are performing too well," he said last month. "And of course I would point to the labor market in particular."
If hiring starts to falter and more people are put out of work, that would cause a lot of pain. But the Fed actually wants to see some signs of this as it fights decades-high inflation. When there are too many open roles, wages start to rise quickly, which can make economy-wide inflation even worse.
The pullback in job openings could be an early sign of softness, as some employers slash open roles in an attempt to cut costs. But economists said they aren't convinced, especially based on what they're seeing in other data.
"Job growth has slowed," Diane Swonk, chief economist at KPMG, told me. "It's still robust."
She noted that the number of people quitting their jobs remains "elevated." That signals workers can still move from role to role — often in pursuit of higher wages — with ease. More than 4.2 million people quit in June, largely unchanged from the previous month.
Coming up: Attention now turns to the US jobs report for July, which arrives Friday morning. Economists surveyed by Refinitiv expect to learn that 250,000 positions were added last month, down from 372,000 in June. In that case, the unemployment rate would hold steady at 3.6%, near its all-time low.
That's unlikely to convince Powell and the Fed that the job market is really facing enough pressure for them to ease up, and means another sharp interest rate hike in September is likely to remain on the table, Mark Hamrick, senior economic analyst at Bankrate, told me.
"The job market has a target on its back, and the Fed is not going to take its eye off of that target for quite some time," Hamrick said.
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