The headline number on job openings edged down a bit in June, but when you look underneath the surface, the labor market still looks very healthy.
Openings have generally been moving higher since December, even with that small decline in June — the level is down from 7.36 million, against 7.59 million in May, but well above the 7.1 million through last November.
Layoffs are still very low and have mostly been moving sideways, while quits have ticked up a little. That combination usually suggests that workers still feel confident enough to leave their jobs, and employers are not pulling back in a meaningful way.
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The broader story is consistent with what we’ve seen over the past few months. Sentiment is improving, consumers are still spending, and businesses are beginning to spend more as some of the earlier headwinds from tariffs and higher energy prices start to fade.
Looking ahead, we think the economy has more tailwinds than headwinds, and that should help the labor market keep this momentum going.
One thing that stood out was the increase in hiring. Put that alongside the ISM manufacturing and services data we got this week and it points to the possibility of a modest pickup in job gains in the July jobs report, which comes out Friday.
Our expectation is that the unemployment rate holds at 4.2%, with payroll gains of roughly 70,000. That would not be a blockbuster number, but against June’s 57,000 and a 12-month average of 36,000, it would still be a healthy reading.
For the Federal Reserve, this probably nudges the odds of a September rate hike a little higher, but only modestly—markets were already pricing roughly a 61% chance of a quarter-point increase after the July 29 hold, which drew three dissents in favor of hiking.
Importantly, wage inflation does not look like a major concern, with average hourly earnings rising by 3.5% over the year.
So the hike or no hike decision will rely mostly on how inflation, especially underlying inflation, behaves between now and September.
