Job openings declined in May, a sign of continuing cooling

Why it matters: The Fed’s next move on interest rates is unclear.

Federal Reserve policymakers are concerned about the strength of the labor market as they continue to tackle stubbornly high inflation.

The Fed chose to leave interest rates unchanged at its June meeting after 10 consecutive increases. The JOLTS report is one of many factors that will guide the Fed’s next interest rate decision.

Some economists worry that the Fed will raise interest rates too high and lead to a recession.

But the JOLTS report as well as previous examinations of economic temperatures have led others to believe that a “soft landing” – an outcome in which inflation eases off the Fed’s 2% target without triggering a recession – is at hand. The bigger question is whether wage growth can continue to cool as workers switch jobs, said Aaron Terrazas, chief economist at employment site Glassdoor.

“A tight labor market does not necessarily have to be inflationary,” he said.

Background: The cold job market retains fundamental strength.

The job market has remained resilient amid the Fed’s efforts to slow the economy, but has shown signs of slowing in recent months. Employment opportunities fell for three consecutive months through April.

first Unemployment claimsalso released by the Labor Department on Thursday, rose higher in the week ended July 1 than the previous week, although the four-week trend shows initial claims declining.

Despite the cool job openings, the reading of 9.8 million in May is high compared to pre-pandemic levels. In 2019, for example, the monthly total hovered around seven million.

“To some extent, I worry that we are becoming desensitized to numbers that were once so striking,” Mr. Terrazas said.

What’s next: The jobs report for June comes out on Friday.

On Friday, the Labor Department will release the employment report for June – another indicator the Fed is watching closely. Economists polled by Bloomberg expect the report to show a gain of 225,000, down from a preliminary reading of 339,000 for May.

The unemployment rate jumped to 3.7 percent in May from 3.4 percent in the previous month. Although the rate remains historically low, it was the highest since October and exceeded analysts’ expectations.

Federal policy makers will hold their next meeting from July 25-26.