The number of available jobs in the US is shrinking

(CNN) — Job opportunities are slowly disappearing in the US, and hiring has screeched to its slowest pace in a decade (aside from the pandemic plunge). That’s making more workers hold tight to the job they’ve already got.

The good news: Those jobs don’t appear to be nearing the chopping block.

That’s according to the Bureau of Labor Statistics’ latest Job Openings and Labor Turnover Survey, which showed that the number of open positions edged back slightly in June, hiring activity sank, layoffs were muted and the number of people quitting their jobs hit a three-year low, according to data released Tuesday.

It’s yet another sign that the once-scalding-hot labor market is not just settling into a steadier state but potentially drifting closer toward a downswing.

“Even as [Tuesday’s] data evidence a labor market cooling at a manageable pace, cautionary flags continue to be waved,” Wells Fargo economists Sarah House and Aubrey George wrote in a note to clients issued Tuesday. “Labor demand remains concentrated in just a few industries, workers are hunkering down and feeling less confident about job availability, and businesses are more reluctant to bring on new hires.”

What the latest data shows

In June, employers posted an estimated 8.18 million jobs. While that’s more than economists expected, it’s a slight step back from the upwardly revised tally of 8.23 million openings in May, according to the JOLTS report.

It’s also the second-lowest monthly total seen so far this year; and it puts the ratio of job openings to job seekers at 1.24, or slightly above the average seen in 2019, BLS data shows.

Economists were expecting job openings to shrink to 8 million, according to FactSet consensus estimates.

Last month’s hiring was some of the weakest in years: The 5.34 million estimated hires and the hires rate (number of hires as a percentage of employment) were the lowest since April 2020, when the job market collapsed at the start of the pandemic. Outside of the pandemic, the hires rate hasn’t been this low since February 2014, BLS data shows.

‘A dramatic slowdown’

“Clearly, we’ve seen a pretty dramatic slowdown in hiring, and that goes along with a sluggish quits rate,” Daniel Zhao, lead economist at employment review and online job site Glassdoor, told CNN. “And I think that together, the slow hiring and quits point to a job market that’s lacking in healthy turnover.”

“Employers are not hiring as aggressively, which means that employees aren’t finding those next opportunities to advance their careers and are instead sitting tight and prioritizing job security instead,” he added.

Beyond the headline job openings number, economists have been closely watching the quits rate, or number of people voluntarily leaving their jobs as a percentage of total employment. That metric serves as a signal for workers’ willingness to test the labor market waters.

In June, that rate held at 2.1%, the lowest since June 2020; however, the number of estimated quits dropped to 3.282 million from 3.403 million and landed at the lowest monthly total since November 2020.

One bright spot for workers and the overall health of the labor market: Layoffs plummeted in June to an estimated 1.498 million, the lowest since November 2022. Although weekly claims for unemployment insurance have been slowly rising, overall layoff activity is well below pre-pandemic levels, Zhao said.

Cautious employers are watching for a catalyst

“When I look at the hard economic data about layoffs, I don’t think the current situation is a red flag; but clearly, it’s something that workers are still very concerned about,” Zhao said, noting that Glassdoor’s most recent survey showed sluggish employee confidence.

The low level of layoffs, he added, indicate that employers are most likely just being prudent and that there is some pent-up demand to resume hiring.

“The signal we’re getting now is more about caution rather than a more serious deterioration in economic conditions,” he said. “Now, obviously, that can’t last forever, right? So, I think we’re waiting for a catalyst in either direction.”

The most likely catalyst? When the Federal Reserve finally pulls that trigger to start a rate cut cycle.

After launching one of the most aggressive monetary-tightening campaigns, starting in March 2022, the US central bank has kept interest rates at a 23-year high for the past 12 months, waiting for inflation to show a sustained trajectory of slowing.

That’s happened, certainly in recent months; however, Fed officials are admittedly more attuned to the stability of the labor market, which has cooled and seen a steady uptick in the unemployment rate.

The Fed will announce its latest interest rate decision Wednesday, which is widely expected to be another pause. Markets are projecting the first rate cut will come in September.

“I don’t think [a September rate cut] would be too late, but I understand the case for why the Fed should cut rates earlier,” Zhao said. “The difficulty with this is always that monetary policy operates on long and variable lags; so, we have already seen a pretty strong slowdown in the housing market, and if a rate cut comes in September, the question is how long does it take to trickle through the job market?”