Good News Is Bad News: The July JOLTS

The number of job openings ticked back up in July to 11.2 million, showing that the labor market continues to favor workers and giving no sign that efforts to slow the economy have had much effect on openings. 

To cool the labor market and bring inflation back down from its four-decade high, the Federal Reserve has been raising interest rates in an attempt to engineer an economic slowdown. Instead, the new Job Openings and Labor Turnover Survey report shows that high openings have the job market at a historically tight level.

“Is this the soft landing the Fed was hoping for?” asked Senior Economist Layla O’Kane during the Lightcast live discussion right after the report came out. “It’s certainly not a hard landing, but I wouldn’t say it's a landing at all. We’re just staying in this period of really high openings, really low layoffs, and we’re not getting to the place where things are cooling off.”

“We’re in a situation where bad news is good news and good news is bad news,” added Senior Economist Elizabeth Crofoot during the broadcast. “The Fed wants to see the easing of job openings in the labor market, and that’s not what we see here.”

The ratio of open jobs to unemployed workers, which has been hovering just above 2:1 for months, ticked slightly down in this report as well. There were 54 available workers per 100 job openings in June, but the new data show there are now only 50.

While openings were up slightly from the revised June figure of 11 million, other indicators remained even. Quits stayed near historical highs, at 4.2 million, while layoffs and separations ticked down near record lows at 1.4 million. Fears of a potential recession grew in July, but while recessions have traditionally corresponded with a drop in openings and quits and an increase in layoffs, no such pattern appeared in the July data. 

“If there was a cooling in the economy, we would want to see job openings come down, and hirings come down a little bit, and we would want to see layoffs potentially going up,” O’Kane said. “We’re not seeing that right now.”

High quits indicate The Great Resignation isn’t done yet, as workers remain confident in their ability to find new jobs, while low layoffs suggest employers are reluctant to get rid of any workers out of fear they may not be able to get them back if needed.

Within specific industries, the biggest gains were in retail, which added 85,000 openings, and transportation, warehousing, and utilities, which added 81,000. 

“We’re seeing a lot of strength in retail trade as well as in arts, entertainment and recreation,” Crofoot said. “We’re hearing a lot about consumer spending shifting from goods to services, but with hot pent-up demand this summer, consumers seem to want some of both.” 

Rising inflation is the main reason the Federal Reserve has been trying to cool the labor market. Over the past 12 months, prices have risen 8.5%, the fastest pace since the 1980s. While the latest Consumer Price Index showed that inflation was at zero in July, ongoing concerns about wages pushing prices higher continue to hover over the high number of job postings. The lack of any slowdown in JOLTS raises the stakes for this Friday’s Employment Situation Report, which will include earnings data. 

“So far, inflation has been pushed up by energy and food prices, with wages rising but not as fast as other costs,” O’Kane said. “I don’t think right now we’re seeing a spiral where wage inflation pushes up inflation overall. Wages overall haven’t increased as much as they have in specific sectors of the economy.” 

Overall, this JOLTS showed little change compared to last month, but that means this tight labor market is staying tight, and any efforts to bring it down to historically normal levels had not yet taken effect as of July. 

In addition to new data on wages, the August Employment Situation report, coming out September 2, will show how job growth has continued to adapt to a tight labor market and shifting economic conditions. Lightcast Senior Economists Ron Hetrick and Rucha Vankudre will present their live analysis at 9 a.m. ET on Friday on the Lightcast LinkedIn page.