Jul 6, 2023 - Economy

The job market's pain-free rebalancing

Data: Bureau of Labor Statistics; Chart: Axios Visuals
Data: Bureau of Labor Statistics; Chart: Axios Visuals

A remarkably robust U.S. labor market is coming into better balance.

Why it matters: That's the broad takeaway from not one or two, but three reports out Thursday morning that show what's happening beneath the surface of the economy.

Driving the news: The number of vacant job openings fell by 496,000 in May, the Labor Department said, suggesting a cooling of demand for workers. But the same report showed the number of workers voluntarily quitting their jobs rose by 250,000 — a sign that workers still feel empowered.

  • Meanwhile, the number of people hired was up (by 107,000) and the number laid off down slightly (35,000).
  • Also Thursday morning, payroll processor ADP said the private sector added a stunning 497,000 jobs in June. The report isn't a perfect harbinger of the official government release, but the blockbuster number is worth paying attention to.
  • The bond market certainly paid attention. The U.S. 10-year yield soared on the news, surpassing 4% for the first time since March. Meanwhile, two-year rates — most sensitive to expected Fed moves — are near the highest level in more than 15 years.

Also Thursday, the Labor Department also released its weekly data on jobless claims, which showed a small uptick in people filing for unemployment benefits last week. But continuing claims dropped — meaning that Americans who lose their job seem to be finding a new one quickly.

Between the lines: Put all of these data points together, and you get a picture of a labor market entering a remarkable sweet spot, with the excess tightness of 2021 and 2022 dissipating, but workers still seeing abundant opportunities.

What they're saying: "Rumors of the Great Resignation's demise were greatly exaggerated, at least for now," wrote Nick Bunker, research director of the Indeed Hiring Lab, noting the uptick in quits.

  • "For now, demand for new hires remains elevated and employers are still holding onto the workers they have," he wrote. "This should be enough to give job seekers, employers and policymakers some comfort as the summer wears on."

The intrigue: One might expect the type of strong job creation shown in the ADP report to come with accelerating pay growth — and accompanying inflation fears. Not so much, according to ADP chief economist Nela Richardson.

  • "We're seeing that consumer-facing services are really leading the way in job creation. Essentially, jobs are following the consumer," she told reporters Thursday morning. However, "the industries that had strong hiring last month also saw declining pay growth."
  • That includes leisure and hospitality, which saw the biggest jobs gain (+232,000) but the sharpest decline in annual pay growth (+7.9% in the 12 months ended in June, compared to 8.4% in May).

What's next: The June jobs report from the Bureau of Labor Statistics is due out Friday at 8:30am ET. Analysts expect it to show a slowdown to 240,000 net jobs created and the unemployment rate edging down to 3.6%.

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