Job Openings Dipped in May, a Sign of Continued Cooling

Why It Matters: The Fed’s next move on interest rates is unclear.

Policymakers at the Federal Reserve have worried about the strength of the labor market as they continue to tackle stubbornly high inflation.

The Fed chose to leave interest rates unchanged in its June meeting after 10 consecutive increases. The JOLTS report is one of several factors that will inform Fed’s next decision on rates.

Some economists worry that the Fed will push interest rates too high and set off a recession.

But the JOLTS report as well as previous economic temperature checks have led others to believe that a “soft landing” — an outcome in which inflation eases to the Fed’s goal of 2 percent without a recession — is within reach. The biggest question is whether wage growth can continue to cool as workers switch jobs, said Aaron Terrazas, chief economist at the career site Glassdoor.

“A tight labor market does not necessarily have to be inflationary,” he said.

Background: A cooling labor market retains underlying strength.

The labor market has remained resilient amid the Fed’s efforts to slow down the economy but has shown signs of cooling in recent months. Job openings were down for three consecutive months until April.

Initial jobless claims, also released by the Labor Department on Thursday, nudged higher in the week ending on July 1 from the week before, though the four-week trend shows initial claims declining.

Although job openings are cooling, the reading of 9.8 million in May is high compared with prepandemic levels. In 2019, for example, the monthly totals hovered around seven million.

“To some degree, I worry we’ve become desensitized to numbers that were once upon a time eye-popping,” Mr. Terrazas said.

What’s Next: The June jobs report comes Friday.

The June employment report — another indicator closely watched by the Fed — will be released by the Labor Department on Friday. Economists surveyed by Bloomberg expect the report to show a gain of 225,000, down from the initial reading of 339,000 for May.

The unemployment rate jumped to 3.7 percent in May, from 3.4 percent a month earlier. Although still historically low, the rate was the highest since October and exceeded analysts’ expectations.

Fed policymakers will hold their next meeting July 25-26.