- Job vacancies rose unexpectedly to 11.2 million in July, according to new government data.
- The print ended a three-month streak of consecutive declines and landed above the estimate of 10.5 million opens.
- The report warns that the labor shortage will be more difficult to solve than previous data suggested.
The economy is slowing, but hiring managers don’t seem to have gotten the memo.
U.S. job openings unexpectedly rose to 11.2 million in July from 11 million, the Bureau of Labor Statistics reported on Tuesday. Economists polled by Bloomberg had expected openings to fall to 10.5 million. The rise ends a three-month streak of back-to-back declines and erases much of the decline seen through June.
June openings were revised to 11 million from 10.7 million, according to the report.
Openings increased the most in the transportation, warehousing and utilities sector, with these businesses adding 81,000 listings last month. The arts, entertainment and recreation sector added 53,000 openings, and the federal government followed with an increase of 47,000 positions.
Durable goods makers — producers of long-lived items like cars and furniture — cut 47,000 openings, marking the biggest one-month drop of any industry.
The surprise increase in openings nationwide, coupled with the June revision, signals that the imbalance in the labor market will not be as easy to close as data from recent months suggests. Job openings have easily exceeded the number of available workers for much of the pandemic, as companies scramble to rehire and a variety of factors prevent Americans from returning to the workforce. The spring decline hinted that the labor shortage could reverse as jobless Americans were matched with openings. Yet the latest publications reveal that the shortage is more difficult than expected and that companies are still firmly in hiring mode.
The increased demand for labor also runs counter to the broader economic context. Gross domestic product declined in the first half of the year as the rapid pace of growth in 2021 led to higher inflation and lower consumer demand. If growth continues to stagnate, lower revenues could cause companies to slow down their hiring plans and even cut costs by laying off workers.
A recession would intensify these trends, and while the United States does not appear to be in a recession today, the jury is still out on whether a recession could emerge soon.
The Federal Reserve also raised interest rates at the fastest rate since 1980 in an aggressive attempt to cool demand and slow inflation. Higher rates make corporate debt more expensive. With the central bank hinting that its bullish cycle is far from over, the hiring environment is only likely to get tougher.
Fed Chairman Jerome Powell said so on Friday, adding that the labor shortage could keep inflation high if it persists.
“There will most likely be an easing of labor market conditions,” he said. “The labor market is particularly strong, but it is clearly unbalanced, with the demand for workers far outstripping the supply of available workers.”
It will take some time for the gap between supply and demand to close. There were about two job openings for every available worker in July, according to the BLS, extending a streak that began in March. Such a demand for workers is usually only seen at the end of an economic expansion, which highlights how unusual the current labor market is.
Resignations data, however, indicated that the workforce was returning to a more normal state. The quit rate slowed to 2.7% from 2.8% in July, marking the lowest figure since May 2021. Americans tend to quit when they think they can easily find a new job with better wages, working conditions or benefits. The continued slowdown suggests workers are settling into the job market more than before, despite job vacancies holding at record highs.