In Sign of Slowing Labor Market, US Job Openings Fell Sharply in June

A 'now hiring' sign in a Manhattan store in New York on May 6, 2022. (Spencer Platt/Getty Images)

After hitting a peak in March, the number of job openings has been falling since, a potential indicator that the labor market could be slowing down.

The number of job openings tumbled by 605,000, to 10.7 million, in June, falling short of the market estimate of 11 million. The rate of job openings dropped to 6.6 percent from 6.9 percent.

According to the monthly Job Openings and Labor Turnover Survey data from the Bureau of Labor Statistics (BLS), this represented the third consecutive decrease. It was also the largest decline since April 2020.

The most significant declines were situated in retail trade (minus 343,000), wholesale trade (minus 82,000), and state and local government education (minus 62,000).

In June, the number of hires fell by 133,000, to 6.374 million, the lowest reading since May 2021. Total separations, which include discharges, layoffs, and quits, also edged lower to an eight-month low of 4.237 million.

A "help wanted" sign in front of a restaurant in Los Angeles on Feb. 4, 2022. (Frederic J. Brown/AFP via Getty Images)

The percentage of individuals reporting lost salary or income increased to 11.7 percent in July from 11 percent in June, according to recent data from Morning Consult. This suggests a further downturn in the labor market, despite the unemployment rate being close to a record low.

The data, derived from 20,000 weekly surveys conducted in July, is strongly correlated with initial unemployment claims, which have also increased in recent weeks, providing an early warning signal for the labor market.

The much-anticipated July nonfarm payroll report will be released on Aug. 5. The market is penciling in 250,000 new jobs and an unemployment rate of 3.6 percent. If accurate, it would be a sharp decrease from the 372,000 positions that were added in June.

Initial jobless claims data will be published, with expectations showing another increase of 259,000 in the past week. The July job cut report produced by the recruiting firm Challenger, Gray and Christmas will also come out.

More Companies Laying Off Workers

In recent months, many large and small companies have been laying off workers, suggesting that the red-hot jobs boom could be cooling off.

For example, Technology juggernaut Oracle has reportedly begun laying off an undisclosed number of its workforce that totals approximately 143,000 employees.

Last month, Shopify slashed 10 percent of its workforce, firing 1,000 staff members.

Convenience store giant 7-Eleven, after its $21 billion acquisition of Speedway, trimmed 880 U.S. corporate jobs.

Automaker Ford announced plans to terminate 8,000 employees as part of its transition to electric vehicle production.

Vimeo, an online video company, confirmed that it's cutting 6 percent of its workforce. CEO Anjali Sud announced on LinkedIn that the website wants to "come out of this economic downturn a stronger company.”

Real estate titan Re/Max announced intentions to lay off 17 percent of its workforce by the end of 2022. Real estate firms Compass and Redfin will also reduce workforce totals by 10 percent and 8 percent, respectively.

Meta Platforms CEO Mark Zuckerberg noted during the company's second-quarter earnings call with analysts that the economic downturn has arrived, which will force him to "slow the pace" of long-term investments.

"We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. It’s always hard to predict how deep or how long these cycles will be, but I’d say that the situation seems worse than it did a quarter ago," Zuckerberg said.

Hiring at small businesses slowed for the fifth straight month in July, according to a new Paychex-IHS Markit Small Business Employment Watch report. The pace of wage hikes and average hourly earnings growth also slowed last month.

"As the national [gross domestic product] flattens, the Small Business Jobs Index also slowed significantly in July," James Diffley, chief regional economist at IHS Markit, said in a statement. "With an index level above 100, we're seeing continued job growth, but the pace of that growth has declined."

The May ADP Small Business Report found that smaller firms lowered their employment levels by 91,000 positions.

How Will the Fed Impact Jobs?

Federal Reserve Chair Jerome Powell refrained from saying the economy was in a recession, arguing that the strong job market didn't indicate an economic downturn.

Powell, when speaking to reporters following the July Federal Open Market Committee policy meeting, alluded to 2.7 million jobs that were added in the first half of 2022 and strong wage growth.

“It doesn’t make sense that the economy could be in recession with this kind of thing happening,” he said.

With the U.S. central bank raising interest rates, economists contend that this would slow business activity because tightening would raise borrowing costs and make credit more expensive or hard to obtain. This would prevent companies from expanding operations or hiring workers, they say.

After the Labor Department reported higher employee compensation in the second quarter, there has been growing concern that inflation remains persistently high and that it would force the Federal Reserve to take more hawkish action on monetary policy.

The Employment Cost Index, a broad measurement of wages and benefits, rose by 1.3 percent in the April-to-June period, topping the market estimate of 1.2 percent.

The Federal Reserve Bank of Atlanta's Wage Growth Tracker stood at 6.7 percent in June. However, the BLS noted that real average hourly earnings (inflation-adjusted) slid to minus 3.6 percent year-over-year in June. When the change in real average hourly earnings is merged with a drop in the average workweek, this figure falls to minus 4.4 percent.