U.S. Job openings jumped and layoffs declined in July, but the rate of hiring slowed

*The U.S. Job Openings and Labor Turnover Survey (JOLTS) is published with a one-month lag, but it complements the Monthly Employment report by providing detailed insights into labor market dynamics such as job openings, hires, layoffs, and other separations. According to JOLTS, layoffs fell to a 16-month low in July and job openings jumped, but hires declined, returning to pre-pandemic levels.

*Job openings increased by 617k to 6.6m in July, approaching the pre-pandemic average of 7.1m as labor demand improves (Chart 1). Openings bounced in construction (+90k), manufacturing (+62k), retail (+172k), and health care sectors (+146k), consistent with the strong rebound in their activities, but declined by 78k in the leisure and hospitality sector which has been disproportionately affected by the COVID-19 pandemic. See Charts 2-5. High frequency data suggest that job openings declined in early August, but increased towards the end of the month (Chart 6).

Total hires decreased to 5.8m in July after surging to 7.2m in May and 7.0m in June (Chart 7). A slowdown in the rate of hiring was to be expected after the initial boost from the reopenings, but its quick return to February’s level points to slower job growth ahead. Hires in the nondurable goods manufacturing (166k) and retail sectors (828k) were above February’s levels, but were depressed in mining and logging (19k), durable goods manufacturing (155k), wholesale trade (122k), and information sectors (64k).

Job separations remained low, with layoffs declining to 1.7m in July from 2.0m in June, placing them 125k below February’s level, and voluntary job quits increasing by 344k to 2.9m in July, well below the prior average of 3.5m, reflecting weak job-finding prospects (Charts 8 and 9).

The strong rate of hiring in May and June, quick return of layoffs to pre-pandemic levels, and low voluntary job quits in the early stages of the recovery explains most of the strong 10.6m cumulative increase in nonfarm payrolls since May, following the 22.2m decline in payrolls in March and April. However, if the rate of hiring continues to slow, it is going to take a longer time to recoup the remaining 52% of jobs lost at the peak of the pandemic.

Other surveys point to increases in job openings, which bodes well for sustained job growth. The National Federation of Independent Business (NFIB) estimates that the share of small businesses with job openings they could not fill in August increased to 33% from 30%, nearing the pre-pandemic average of 37%, and a net 21% of small businesses plan to increase employment (Chart 10).

According to the Fed’s Beige Book reflecting economic and labor market conditions in August:

“Employment increased overall among Districts, with gains in manufacturing cited most often. However, some Districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft. Firms continued to experience difficulty finding necessary labor, a matter compounded by day care availability, as well as uncertainty over the coming school year and jobless benefits.”

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Roiana Reid, [email protected]

Member FINRA & SIPC
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