Market Cools But Stays Strong

Job openings dropped more than expected in June, indicating that the economic slowdown has begun to show up in the labor market, but the fact that layoffs and  quits held steady indicates the market is still strong as workers remain confident and employers are hesitant to let anyone go. 

The Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics tracks hiring, separations, and job openings every month. This month’s report showed there were 10.7 million vacancies in June, down by 600,000 from May. This was the first month since November 2021 in which job openings were under 11 million. 

But despite that decline, and despite negative growth in second-quarter GDP, there is little evidence in the job market that a recession is coming. 

“Why are we worried about a recession?” asked Lightcast Chief Economist Bledi Taska this morning, discussing the report. “We’re worried about a recession because lots of peoples’ lives would be affected. But that’s not the case. The main reason we’re afraid of a recession is not there.”

This morning on the Lightcast LinkedIn page, Taska and Senior Economist Layla O’Kane shared their first takes and analysis of this morning’s report. One of their main takeaways from the data was how workers continue to be at an advantage relative to employers in a tight job market.

“We’re not seeing employers turning toward the sort of things that would have us worried about a recession,” O’Kane said.

The quit rate is one reflection of this—though quits ticked down slightly (from 4.27 million to 4.24 million), they're still high, showing the Great Resignation is still underway and workers feel confident in their ability to find new and potentially better jobs.

The ratio of job openings to unemployed workers provides another perspective on how tight the labor market continues to be—for every 100 job openings, only 55 workers are available to fill them. That's up slightly but still near a record low.

Just as the quit rate shows that workers are confident about finding other jobs, the layoff rate reflects whether employers are worried about losing business. That rate stayed mostly consistent at 0.9%, and the total number of layoffs actually declined slightly (moving from 1.4 million to 1.3 million).

This indicates businesses aren’t scaling down their existing workforce, instead just curtailing their plans for growth or giving up on filling positions that are currently open. As a result, employer cutbacks are less likely to cause job losses. 

As Lightcast Senior Economist Ron Hetrick said about last month’s Employment Situation report, “You can’t lay off what you were never able to hire. This may be an economic downturn in terms of GDP, but I don’t think you’re going to see the accompanying layoffs that go with it.”

After raising interest rates by 0.75% in both June and July, the Federal Reserve is trying to engineer a “soft landing” that reduces inflation without causing the widespread economic hardship of a recession. In accomplishing this, one of the Fed’s goals has been to reduce the number of job vacancies without bringing up the unemployment rate. This would be an unprecedented maneuver, and some economists have been skeptical that it is possible, but Lightcast economists said today’s JOLTS is encouraging. 

“Employers are saying ‘We’re not going to lay people off but we’re going to give up on finding some of the talent we want,’” O’Kane said during our broadcast. “Overall, if I were the Fed, I’d feel good about the situation.” 

The July Employment Situation report, coming out August 5, will provide a more up-to-date look at job creation and unemployment in July, providing a clearer picture on how the labor market continues to evolve in a complex economy. Lightcast Senior Economists Ron Hetrick and Rucha Vankudre will present their live analysis at 9:00 a.m. ET on Friday on the Lightcast LinkedIn page.