US JOB OPENINGS UNEXPECTEDLY INCREASE FROM A THREE-YEAR LOW

(Bloomberg) -- US job openings unexpectedly rose in May, interrupting a months-long downtrend that underscored a gradual slowdown in labor demand.

Available positions increased to 8.14 million from a downwardly revised 7.92 million reading in the prior month that was the lowest in three years, the Bureau of Labor Statistics Job Openings and Labor Turnover Survey, known as JOLTS, showed Tuesday. The median estimate in a Bloomberg survey of economists called for 7.95 million openings.

Both hiring and layoffs picked up in a sign of churn in the job market. The quits rate was unchanged.

The number of vacancies per unemployed worker, a ratio the Federal Reserve watches closely, held at 1.2 and matched the lowest since June 2021. At its peak in 2022, the ratio was 2 to 1.

Speaking Tuesday at a European central bank conference in Portugal, Fed Chair Jerome Powell said there’s been a “substantial” move toward better balance in the labor market between the supply of and demand for workers. He continued to describe the job market as strong, but said it is cooling off appropriately so.

What Bloomberg Economics Says...

“The labor market is on a cooling path. The monthly increase in vacancies came largely from government jobs, while the ratio of vacancies to unemployed workers has returned to pre-Covid levels. As this ratio continues to fall and the labor market cools, we think the Fed may still cut rates twice this year.”

— Stuart Paul, economist

For the full note, click here

Although the JOLTS data suggest healthy labor demand, it’s difficult to draw conclusions from one month. Other figures point to a job market that is slowly cooling and looking more like the one before the pandemic. Hiring and wage gains have eased in recent months, while more people are now receiving unemployment benefits after staying historically low.

Stephen Stanley, chief US economist at Santander US Capital Markets LLC, said in a note that though the labor market has normalized, it is still healthy when compared to levels seen before the pandemic.

“Job openings averaged about 7.1 million in 2018 and 2019, peaking at 7.6 million,” Stanley said. “So, though it has cooled substantially from the extraordinary situation in 2022 and 2023, labor demand remains vigorous.”

The May advance in openings was driven by manufacturing, government and health care. Vacancies in accommodation and food services led all industries that declined.

Economists expect that trend to continue ahead of Friday’s jobs report, which is expected to show employers added about 195,000 payrolls in June and the unemployment rate held at 4%.

The pickup in hiring was led by professional and business services and construction. Business services was also the industry with the most layoffs, suggesting a larger number of people are switching jobs. Overall, the South accounted for most of the rise in dismissals.

The so-called quits rate, which measures people who voluntarily leave their job, held at 2.2, the lowest since 2020. The quits rate suggests that people are less confident in their ability to find a new position than they were a couple years ago.

Some economists have questioned the reliability of the JOLTS statistics, in part because of the survey’s low response rate.

--With assistance from Chris Middleton and Charles Ayitey.

(Adds economists’ comments. A previous version corrected month in paragraph on industry details for openings.)

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