Job openings remained near record highs in July and layoffs stayed low even as the Federal Reserve moved to cool off the labor market, according to Labor Department data released Tuesday.
The July Job Openings and Labor Turnover (JOLTS) report showed the job market powering through rising interest rates meant to ease a labor shortage that is likely driving inflation higher.
“Even if economic growth slows, today’s report shows the labor market remains strong,” wrote AnnElizabeth Konkel, senior economist at Indeed Hiring Lab, in a Tuesday analysis.
U.S. employers had roughly 11.2 million open jobs on the final business day of July, in line with revised figures from June. There are nearly two job openings listed for each one of the 5.7 million Americans who reported being unemployed in July, according to Labor Department data.
“Given the Federal Reserve wants to see this metric fall, today’s rise is not the direction they were hoping to see,” Konkel explained.
“Moreover, this increase underscores that some employers will continue to face hiring challenges. And with job openings at 11.2 million, employer demand for workers is still robust.”
Businesses hired roughly 6.4 million new workers in July and lost 5.9 million for a net increase of roughly 500,000 jobs. Of the nearly 6 million Americans who left jobs in July, 4.2 million quit on their own accord, likely to take a job with better compensation or career opportunities elsewhere.
The quits rate, which measures the percentage of the workforce which quit their jobs in a given month, remained at 2.7 percent, just below a record high of 2.9 percent set earlier this year.
The persistence of high job openings and a steep quits rate is a sign of how much power jobseekers continued to have with the size of the workforce still below pre-pandemic levels. Businesses have boosted wages at rapid rates to find and maintain enough staff to keep up with consumer spending, which has risen well above pre-pandemic levels and has fallen only slightly due to inflation.
“While lower than earlier this year, the quits rate is above where it was pre-pandemic and highlights that workers remain in the driver’s seat,” Konkel wrote.
Roughly 1.4 million Americans were laid off in July, largely unchanged from June’s level, as employers sought to avoid losing scarce workers. While millions of Americans are typically laid off from jobs every year, layoff rates have remained historically low since 2021 as businesses struggle to keep workers from taking higher paying jobs at other firms.
The July JOLTS report is the latest sign of labor market strength amid conditions meant to make it weaker. The U.S. added a stunning 528,000 jobs last month, even after a steep rise in inflation and rapid Fed interest rate hikes that economists expected to slow hiring to a crawl.
While the strength of the labor market shows how far the U.S. may be from falling into a recession, it poses challenges for the Fed as they attempt to bring job openings and wage growth down to a more sustainable level.
Rapid wage growth and labor shortages are one of several forces pushing inflation higher, and the Fed has expressed concerns about a potential cycle of price and wage hikes that could make inflation hard to tame.
“Today’s report confirms it will take time and a weaker economy to bring labor demand and supply into better balance – a necessary step to take the heat off wage inflation. While the labor market is still carrying solid momentum, we expect the hefty pace of job growth will moderate in the second half of the year as companies face a weaker domestic and external backdrop,” wrote Lydia Boussour, lead US economist at Oxford Economics, in a Tuesday analysis.
Updated at 11:32 a.m.
