The United States job market is experiencing a slowdown, with hiring at its slowest pace in a decade, excluding the pandemic-induced plunge. This trend is indicated by the Bureau of Labor Statistics’ latest Job Openings and Labor Turnover Survey (JOLTS) for June. The number of open positions slightly decreased, hiring activity declined, layoffs remained minimal, and the number of people quitting their jobs reached a three-year low.
The JOLTS report showed that employers posted an estimated 8.18 million jobs in June, which is more than economists expected but a slight decrease from the revised tally of 8.23 million openings in May. This is the second-lowest monthly total seen so far this year, and the ratio of job openings to job seekers is slightly above the average seen in 2019.
The slowdown in hiring and the low quits rate suggest a job market that lacks healthy turnover. Employers are not hiring as aggressively, leading employees to prioritize job security over career advancement. The quits rate, which serves as a signal for workers’ willingness to explore job opportunities, held steady at 2.1% in June but dropped to 3.282 million from 3.403 million.
One positive aspect of the report is the significant decrease in layoffs, which reached an estimated 1.498 million in June, the lowest since November 2022. Despite a gradual increase in weekly unemployment claims, overall layoff activity remains well below pre-pandemic levels.
The low level of layoffs indicates that employers are likely being cautious, and there is pent-up demand to resume hiring. However, this trend may not last forever, and economists are waiting for a catalyst to determine the direction of the labor market. The most likely catalyst could be the Federal Reserve’s decision to start a rate cut cycle.
After launching an aggressive monetary-tightening campaign in March 2022, the US central bank has kept interest rates at a 23-year high for the past 12 months, waiting for inflation to show a sustained trajectory of slowing. The Fed will announce its latest interest rate decision on Wednesday, with markets projecting the first rate cut to come in September. Economists debate whether a September rate cut would be too late, but they understand the case for why the Fed should cut rates earlier. The challenge lies in the long and variable lags of monetary policy, as its effects take time to trickle through the job market.
