US job openings spike in labor market likely still 'treading water'

The number of US job openings unexpectedly surged in May to the highest level since November 2024, a potential sign that the domestic labor market is not ready to cool yet.

There were 7.77 million job openings in May, up about 5%, or 374,000 more openings than in April, the US Bureau of Labor Statistics reported July 1. Economists had expected openings to drop in May to 7.30 million, according to estimates compiled by Econoday.

Nearly 75% of this increase from April was in the leisure and hospitality sector as restaurants and hotels geared up for the summer, with 279,000 more openings than in April. The concentration of monthly growth in just one industry makes it difficult to gauge the overall health of the jobs market in this report, said Nancy Vanden Houten, a senior economist with Oxford Economics.

"Overall, the report was consistent with a labor market more or less treading water, at least in the private sector," Vanden Houten said.

The rise in job openings and other data ahead of the government's June jobs report, to be released July 3, show that the pace of labor market softening is more gradual, Wells Fargo economists Sarah House and Nicole Cervi wrote in a July 1 note.

This rise in job openings boosted the ratio between openings per unemployed worker to 1.07, the highest level since January.

"The near-leveling out of this ratio in recent months suggests a broad-based slackening in the labor market has yet to meaningfully take hold, similar to the unemployment rate having moved sideways for nearly a year now," House and Cervi wrote.

Still, the overall rise in job openings appeared to be "statistical noise," said Andrew Flowers, chief economist at Appcast.

The outsize increase in accommodation and food services openings was "suspicious" and did not match data from employment site Indeed, which shows that postings for food preparation and service jobs are down 5.3% from a year ago, Flowers said.

"I don't believe this is anything more than volatile data," Flowers said.

Meanwhile, hiring remains relatively low. There were 5.5 million hires in May, down 112,000 from April.

More recent indicators, particularly weekly jobless claims data, point to "softer" conditions in the labor market, said Vanden Houten with Oxford.

"We look for the June payroll employment report to show a slowdown in the pace of job growth and an uptick in the unemployment rate," said Vanden Houten.

Economists expect this week's jobs report to show that 115,000 jobs were added in June, down from the 139,000 added in May, and the unemployment rate to tick up to 4.3% from 4.2% in May, according to Econoday. The US unemployment rate has been at 4.2% since March and has not been above 4.2% since October 2021.