The Job Quits Rate, which measures how many workers quit their jobs, fell decisively below pre-pandemic levels last month. The latest Job Openings and Labor Turnover Survey (JOLTS) report data indicates a modest decline in job openings, falling from 8.23 million in May to 8.18 million in June. This weakened amount aligns with what had been expected, confirming a slowly weakening labor market returning to pre-pandemic levels. However, the hiring rate fall-off from 3.6% to 3.4% raises concerns.
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The number of people quitting jobs fell to 3.3 million in June from 3.4 million in the prior month. The workforce has seen the lowest level of quits since September 2020, which is another sign that the labor market has softened.
To better understand the economic implications and market trends, we’ll examine where the jobs are and where they aren’t, why quit rates are down, and what the Federal Reserve policy-making committee may think of all this.
Sector-Specific Job Trends
The construction, manufacturing, and private education and health services sectors have all experienced declines in job openings. Specifically, job openings in the private sector decreased by 102,000, while job openings in government increased by 56,000. The ratio of job openings to unemployed workers fell slightly from 1.23 to 1.20, primarily due to increased unemployment. Although this does not raise major red flags, the low layoff rate of 0.9% suggests a gradual loosening in the labor market.
Implications of Hiring Rate Drop
Citi (C) analysts warn that labor market weakness typically does not progress in a straight line. The JOLTS statistics are not published in real-time, so they may not fully capture the current state. However, the drop in hiring rates, especially in cyclical industries like construction and manufacturing, suggests a broader weakening in the labor market in the coming months. This trend is consistent with a rising unemployment rate, which Citi expects to increase to 4.2% in the July report.
Fed’s Potential Response
According to the Labor Department, job openings dipped to 8.18 million in June from 8.23 million in May. New openings have gradually fallen from a record 12 million in 2022. While many openings are never filled, the trend in job postings provides clues about the labor market’s health and the broader economy. As the labor market cools, the Federal Reserve may find it appropriate to cut interest rates soon.
Quitting Rates and Economic Outlook
The number of people quitting their jobs fell to a nearly four-year low, indicating a dip in workers’ confidence and fewer opportunities. This trend suggests employees are becoming more cautious about leaving their positions amid economic uncertainty. Such behavior typically signals a cooling labor market and aligns with declining job openings and hiring rates.
Key Takeaways
Job openings fell to 8.18 million in June, down from 8.23 million in May. Hiring rates dropped from 3.6% to 3.4%, with significant declines in leisure and hospitality. Private sector job openings decreased by 102,000, while government openings rose by 56,000. The labor market is gradually loosening, as indicated by the low layoff rate of 0.9%. Citi analysts predict an increase in the unemployment rate to 4.2% in July. This cooling labor market could prompt the Federal Reserve to consider cutting interest rates, potentially impacting investment strategies.
