The US labor market is cooling from ‘white hot to red hot’

Still hot.
Still hot.
Image: Reuters/Mike Blake
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Americans are increasingly worried about a recession, but they won’t find any signs of it in the job market—at least not yet.

US government data released Wednesday showed a bit of a slowdown in the number of new job postings and people choosing to leave their job, but labor market indicators remain historically strong. Or as Glassdoor economist Daniel Zhao put it: The job market has gone from “white hot to red hot.”

In May, the quits rate, or the number of workers quitting as a percentage of all employed Americans, dipped to 2.8% from 2.9%, according to new data from the US Bureau of Labor Statistics. Job openings declined by 427,000 to 11.3 million, putting the number of job openings per unemployed worker at 1.9, only slightly below 2 before.

The layoffs rate, meanwhile, remained at a record low of 0.9%. Prior to the pandemic, the lowest level this measure had reached was 1.1%, said labor economist Nick Bunker. “If the labor market were quickly and suddenly taking a downturn, we would see employers’ demand for new hires drop and their willingness to let workers go increase,” Bunker said. “For now, we aren’t seeing a sudden move in either direction.”

No signs of a recession—yet

One area where the jobs picture weakened was the information sector—which includes the tech industry. Layoffs in that sector increased from 0.9% to 1% from April to May, but that’s “not a very concerning sign,” Bunker added.

Still, while encouraging, the data doesn’t negate the possibility of a future downturn. Americans are canceling new home construction and pulling back on discretionary spending on goods. As a result, manufacturing activity is declining.

“There will be a time when the US labor market takes a downturn, jobs are shed at a higher rate, and workers stop quitting their jobs,” Bunker said. “But that time has yet to come. The labor market remains very tight and very hot.”