The June data follows several months of record-high job openings and quit rates, which marked the high point of the hot labor market, as employers scrambled to find workers amid shortages across many sectors. June’s figures continue to reflect a strong labor market.
“June was a pivotal month for the labor market,” said Julia Pollak, a labor economist at ZipRecruiter. “There were interest rate hikes, the stock market entered a bear market, industrial output was negative and consumer spending slowed down. A whole number of key recession indicators flipped.”
Corporations on the front lines of the economy say cracks are forming
The slowing down in the labor market is related to mounting head winds in the economy. Inflation has soared to a 40-year high, which is weighing on many companies and households. In response, the Federal Reserve has raised interest rates four times this year, including by three-quarters of a percentage point in July.
The Fed is aiming to bring prices down, but that work is also expected to push the unemployment rate from 3.6 percent to 4.1 percent. The Fed’s goal is to reduce the number of job postings and hirings without triggering a massive wave of job losses.
“What we’re seeing in June will get quite a bit worse in July,” Pollak said. “That’s because [the Fed] is throwing a lot of cold water on the economy generally and causing a huge amount of uncertainty.”
The retail and wholesale trade sectors saw a notable decline in job openings in June, which could reflect a shift in consumer demand away from goods toward services that people cut back on during the pandemic, such eating out, going to the movies and travel. Job openings in retail dropped in June to 800,000 from 1.2 million in May. Openings in wholesale trade fell from 370,000 to 290,000.
“Some sectors are puling back on hiring intentions because their broader economic outlook is starting to become less rosy or they have industry-specific concerns,” said Nick Bunker, head of research at Indeed’s Hiring Lab. “Retail and wholesale trade are sectors that employ lots of people and there’s lots of inventory buildup in retail. Some employers are starting to say, ‘Okay, we have too much inventory, and there won’t be continued demand for good, so let’s slow down hiring.’ At the same time, they’re not letting workers go.”
A record number of Americans quit their jobs over the past year, in a phenomenon known as the Great Resignation, as a hot labor market spurred by the pandemic afforded them leverage to find better-paying opportunities, particularly in leisure and hospitality. But data suggests this era may be coming to a close. Although workers are still quitting their jobs at a higher than normal rate, Americans are no longer pursuing other opportunities at the same pace that they had been.
“Quits are still very elevated historically, but they are not accelerating,” said Kory Kantenga, a senior economist at LinkedIn. “There’s a lot of uncertainty about whether there is going to be a recession, and people don’t quit their jobs during recessions.”
The number of layoffs in June remained consistent with the low levels of previous months, despite a recent uptick in unemployment claims, and elevated layoffs in the information sector, which includes the tech industry. In June, the sector’s layoff rate jumped from 0.9 percent to 1.3 percent, according to the most recent BLS data. Netflix, MasterClass and Coinbase let go of hundreds of employees in June. Those layoffs accelerated in July, with Meta and Apple announcing hiring freezes.
“There are lots of anecdotes [about layoffs] but these data tell a different story,” said Bunker. “One way to think about this is that this is the 16th straight month that the layoffs rate is below its pre-pandemic low. The whole labor market is strong, and gives me more confidence that people who are losing work are getting new jobs.”
The job market is beginning to show cracks
Stefan Hayden, a front-end software developer in New Jersey, received a termination email on July 20 from his job at the cloud-based music platform Splice.
“I was personally caught off-guard. I don’t know if I was looking at the right indicators,” Hayden said. “But if other tech companies are having problems raising money and making growth numbers, I could only imagine Splice is, too.”
Hayden said he has had no trouble finding new job opportunities in software development. In fact, he said, he’s overwhelmed by the number of open positions and the recruiters getting in touch with him.
“The tech industry is still looking pretty good,” Hayden said. “Some small companies are feeling the squeeze, but a lot of companies are still growing and hiring. I have a long list of places that are hiring, and I’m in a very good position. That seems to be [the case with] other developers and tech workers.”