The U.S. labor market sent mixed signals in July, as the Bureau of Labor Statistics reported job openings of 7.271 million on the last business day of the month. That was below the 7.3 million consensus forecast from economists polled by Reuters, but still an increase of 89,000 from June’s downwardly revised 7.182 million. The job openings rate ticked up to 4.4% from 4.3%.
The modest rise in available positions was concentrated in manufacturing, which added 79,000 openings, mostly in durable goods, and professional and business services, which added 65,000. However, employers pulled back on actual hiring. Total hires fell by 278,000 to 5.054 million, and the hiring rate declined to 3.2% from 3.4%. Professional and business services accounted for a large part of that decline, with hiring in the sector dropping by 188,000.
Layoffs remained historically low, falling by 119,000 to 1.666 million, while the layoff rate edged down to 1.0% from 1.1%. The quits rate also softened, suggesting workers are becoming less confident about finding better opportunities. Heather Long, chief economist at Navy Federal Credit Union, described the environment as “low fire, low hire,” saying companies are growing cautious amid geopolitical tensions and higher borrowing costs.
The report lands at a delicate moment for the Federal Reserve. Fed Chair Kevin Warsh recently said policymakers still have work to do to be confident inflation is moving toward the 2% target. Market pricing via CME Group’s FedWatch tool showed about a 66% probability of a 25-basis-point rate increase at the September 15-16 meeting, with the federal funds rate currently at 3.50%-3.75%. At the same time, cooler hiring and low layoffs could give the central bank room to hold policy steady if inflation eases.
Investors now look to Friday’s nonfarm payrolls report for the next major labor market signal. Economists expect payroll growth to rebound in August after an unexpected decline in July, but the broader trend points to a significant slowdown from the post-pandemic pace.
