Slowing job trends point to stabilizing labor market

Recent "boring" data suggests a return to normal, cooler employment conditions after a "red hot" streak.

For anyone looking, there were 8.1 million job openings out there in May, according to the Bureau of Labor Statistics — about 200,000 more than the previous month. Overall, the number of jobs has been bopping up and down over the past couple of years, but generally trending down.

However, that’s OK.

Here’s one way to look at the latest numbers on the labor market, courtesy of Matt Paniati, senior adviser at Capital Advisors Group. “I would say the report was a bit of a snoozer, honestly,” he said.

While the report may not be very exciting, the lack of dramatic changes can be a sign of relief for economists, according to Nick Bunker, director of North American economic research at Indeed.

“It’s a very boring report, and I’m glad to see that,” Bunker said.

The numbers are dull for a good reason, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

“They tell an important story about the labor market, that the labor market has come into a better balance over the course of this year,” Luzzetti said.

Looking at specifics, 2.2% of workers quit their jobs in May. That’s 3.5 million people who likely felt comfortable enough with the job market to leave their employment. Last year, that number shrank a lot, but this year, it stopped shrinking. It’s been the same for seven months now.

“The quits rate has returned back to and actually below 2019 levels,” Luzzetti said. “It has been a good sign that the rate has stabilized.”

It has been a similar story with hires. Roughly 5.8 million people were hired in May, about the same as the month before. There were 8.1 million job openings, a bit more than the month before. 

“That 8.1 million is around the range, frankly, you’d want to see right now in the U.S. labor market,” Bunker said. “That’s a sign of a fairly well-balanced, stabilized labor market.”

Only a couple of years ago, people were calling the labor market “boiling,” “red hot,” an “inflation driver” and “unsustainable.” It’s natural, especially with the Federal Reserve raising interest rates, for that market to cool down. 

The logical fear is that something that’s cooling can become cold. According to Paniati of Capital Advisors Group, that fear is fading. A normal job market is often a boring one.

“The market is cooling, but maybe a better way to describe it is that it’s normalizing,” he said.