The number of job openings fell for the third consecutive month in June, a sign that the hot US labor market may be starting to cool.
Employers posted 10.7 million job vacancies on the last day of June, the Labor Department said Tuesday. That’s high by historical standards, but represents a sharp drop from 11.3 million opens in May and a record 11.9 million in March. This is the largest one-month drop in two decades the government has tracked this data, except for the two months at the start of the coronavirus pandemic in 2020.
The decline was concentrated in retail, the latest sign the sector is struggling as consumers shift spending from goods to services as the pandemic wanes. But job vacancies also fell in leisure and hospitality, the sector that was hardest hit by labor shortages last year.
The labor market remains strong by most measures. There were still nearly twice as many job vacancies as unemployed in June, and employers are raising wages and offering other incentives to attract and retain staff. Layoffs remained near a record low in June, suggesting employers were reluctant to part with the staff they worked so hard to hire. And the number of workers voluntarily quitting their jobs remains high, although it has fallen from last year’s peak.
The recent drop in openings should be encouraging news for Federal Reserve policymakers, who have been trying to slow the economy in an effort to keep inflation under control. Fed Chairman Jerome H. Powell and other officials have pointed to job vacancies as evidence that the job market is too hot. They hope employers will start advertising fewer jobs and hiring fewer workers before they start laying off workers, allowing the labor market to cool without causing unemployment to spike.
Yet any slowdown in the labor market will mean that workers will have less leverage to demand increases when wages are already failing to keep up with inflation. Slower wage growth, in turn, could induce consumers to spend less, increasing the risk of the United States slipping into a recession.
The labor market “is definitely losing steam, and that’s what’s reducing people’s ability to spend,” said Tim Quinlan, senior economist at Wells Fargo.
Economists and policymakers will get a more up-to-date picture of the labor market on Friday, when the Labor Department releases July hiring and unemployment data. Forecasters polled by FactSet expect the report to show employers added about 250,000 jobs last month, up from 372,000 in June.