JOLTS Signals a More Balanced Labor Market Despite Slower Payroll Growth
The latest U.S. labor market data suggest that hiring demand remains resilient but is becoming increasingly measured as employers navigate slowing economic momentum, elevated financing costs, and persistent uncertainty. While the June Employment Situation report pointed to a moderation in payroll growth, the May Job Openings and Labor Turnover Survey (JOLTS) provides a more comprehensive view of labor demand, indicating that businesses continue to recruit workers without significantly expanding their workforce. Together, these reports show the transitioning of the labor market from the exceptionally tight conditions seen over the past several years toward a more balanced environment rather than one experiencing a sharp deterioration.
The JOLTS report showed that the number of job openings remained essentially unchanged at 7.594 million in May, with the job openings rate holding steady at 4.6%. Although vacancies remain well below the record highs reached during the post-pandemic recovery, the stability of job openings suggests that employers continue to seek additional workers despite a slower pace of economic activity. At the same time, the number of hires remained unchanged at 5.170 million, while the hires rate held at 3.3%, indicating that businesses are filling positions at a steady, though restrained, pace rather than aggressively expanding payrolls. Total separations also changed little, rising slightly to 5.101 million, with the separations rate remaining at 3.2%, underscoring the overall stability of labor market turnover. Perhaps the most reassuring aspect of the report is that employee confidence remains relatively intact. Voluntary quits, widely viewed as an indicator of workers' willingness to leave their current jobs for better opportunities, held steady at 3.1 million, while the quits rate remained at 1.9%. Meanwhile, layoffs and discharges were unchanged at 1.7 million, with the layoffs rate holding at 1.1%. Together, these figures suggest that employers are neither engaging in widespread workforce reductions nor facing a significant increase in employee turnover. Instead, businesses appear to be maintaining existing staffing levels while selectively adding new workers where demand remains strongest. Industry-level data reveal where labor demand continues to be concentrated. Professional and business services recorded 1.485 million job openings, the highest among major private industries, highlighting continued demand for skilled professional, technical, and administrative workers. Trade, transportation, and utilities followed with 1.234 million openings, reflecting ongoing labor needs across logistics, wholesale, and retail supply chains. Health care and social assistance posted 1.424 million openings, remaining one of the strongest sources of labor demand despite moderating from earlier peaks. Leisure and hospitality, one of the sectors most affected by labor shortages in recent years, recorded 941,000 openings after improving from April, while wholesale trade registered one of the month's largest gains, adding 71,000 job openings. By contrast, financial activities continued to soften, with openings declining to 376,000, suggesting weaker hiring demand across banking, insurance, and real estate-related businesses.
The JOLTS report also offers an important perspective on hiring practices among small businesses, which account for a significant share of private-sector employment in the United States. Establishments with 1 to 9 employees showed little or no change in job openings, hires, and separations during May, indicating that the smallest employers have largely shifted away from the aggressive hiring strategies that characterized the immediate post-pandemic recovery. Rather than rapidly expanding payrolls, many small firms appear to be maintaining relatively stable workforces while hiring only when operational needs require additional staff. This cautious approach reflects a broader change in the business environment. Over the past several years, small businesses faced intense competition for workers, forcing many to raise wages, improve benefits, and offer greater workplace flexibility to attract and retain employees. Today's labor market appears less overheated, but recruiting remains challenging, particularly for firms with limited financial resources. Higher borrowing costs have increased the cost of expansion, while persistent wage pressures continue to weigh on operating expenses. As a result, many small employers are likely prioritizing productivity gains, automation where feasible, and more targeted recruitment rather than adding employees across the board. The stability in job openings and hires also suggests that smaller businesses are becoming increasingly selective in their hiring decisions. Instead of filling every vacancy immediately, employers appear more willing to leave positions open until they identify candidates with the necessary skills and experience. This measured approach helps businesses control labor costs while ensuring that new hires contribute meaningfully to productivity. At the same time, the absence of a meaningful increase in layoffs indicates that most firms are choosing to retain their existing workforce despite slower economic growth, reflecting the lessons learned from the severe labor shortages experienced in recent years. After investing considerable time and resources in recruiting and training employees, many businesses appear reluctant to reduce headcount unless economic conditions deteriorate significantly.
Stable quits further reinforce this interpretation. With 3.1 million workers voluntarily leaving their jobs in May, employee confidence remains relatively healthy, although well below the elevated levels seen during the height of the labor market recovery. For small businesses, this means employee retention continues to be nearly as important as recruitment. Employers are increasingly focused on preserving experienced workers, recognizing that replacing skilled employees remains both costly and time-consuming. Taken together, the establishment-size data suggest that small businesses are entering a period characterized less by rapid workforce expansion and more by careful workforce management, balancing hiring needs against cost pressures and an increasingly uncertain economic outlook.
The June Employment Situation report largely reinforces the message emerging from the JOLTS data. Total nonfarm payroll employment increased by 57,000, considerably slower than earlier in the year but broadly consistent with the average monthly gain of 36,000 recorded over the previous twelve months. The unemployment rate remained essentially unchanged at 4.2%, with 7.1 million people unemployed, suggesting that the labor market continues to generate sufficient employment to keep unemployment historically low even as hiring slows. Beneath the headline figures, however, some indicators pointed to a gradual easing in labor market conditions. The labor force participation rate declined 0.3 percentage point to 61.5%, while the employment-population ratio edged down 0.2 percentage point to 59.0%. The number of people employed part time for economic reasons remained little changed at 4.7 million, and the number of long-term unemployed stood at 1.9 million, accounting for 27.3% of all unemployed workers. Although none of these measures indicates significant deterioration, together they suggest that labor market momentum has become more subdued than it was during the exceptionally strong recovery period. Payroll growth also varied considerably across industries. Professional and business services added 36,000 jobs, continuing a steady recovery that has produced 172,000 new positions since October 2025. Social assistance increased employment by 25,000, primarily in individual and family services, while health care added 22,000 jobs, led by hospitals. Offsetting these gains, leisure and hospitality lost 61,000 jobs, reflecting weaker-than-usual seasonal hiring and leaving employment in the sector little changed for the year to date. Most other major industries—including construction, manufacturing, financial activities, retail trade, transportation and warehousing, information, and government—experienced relatively little change during the month, highlighting the increasingly uneven nature of job creation across the economy.
Despite slower hiring, wage growth remained relatively healthy. Average hourly earnings for all private-sector employees increased by 13 cents, or 0.3%, to $37.64 in June and were 3.5% higher than a year earlier. The average workweek remained unchanged at 34.3 hours, while average weekly earnings rose to $1,291.05. These figures suggest that although hiring demand has moderated, employers continue to compete for workers through higher compensation, supporting household income and consumer spending. Nevertheless, revisions to previous payroll estimates tempered the overall picture. Employment gains for April and May were revised downward by a combined 74,000, reducing the previously reported strength of labor market growth and reinforcing the view that hiring momentum has slowed more noticeably than initially estimated.
Taken together, the May JOLTS report and the June Employment Situation release point to a labor market that is cooling gradually rather than weakening abruptly. Employers continue to post millions of vacancies, hiring activity remains stable, layoffs are subdued, and wage growth continues to outpace historical norms. At the same time, slower payroll gains, declining labor force participation, and downward revisions to previous employment data suggest that businesses are becoming increasingly cautious as economic conditions evolve. For policymakers, investors, and business leaders—particularly small employers—the challenge is no longer navigating an overheated labor market but adapting to one in which hiring remains possible, though increasingly deliberate, selective, and dependent on sustained economic demand.
