The once red-hot US job market has suddenly cooled. Companies aren’t laying off workers en masse — but they’re not exactly rolling out the welcome mat for new hires either. It’s a classic case of “it’s not you, it’s the economy.”

Slim pickings for job seekers: The latest Job Openings and Labor Turnover survey paints a chilly picture for those on the hunt for new opportunities. In June, there were 5.3M hires — 314K fewer than in May and the lowest hiring rate since the early days of the pandemic.

• The hiring rate, at 3.4% of total employment, is half a point below pre-pandemic levels.
• As Guy Berger of the Burning Glass Institute told Axios, “If you hear people saying ‘it’s a really tough time to find a job,’ this is why.”

On the flip side, those who already have jobs can breathe a little easier. The layoff and discharge rate hit a record low of 0.9% in June. It seems employers are holding onto the staff they have, even as they pump the brakes on new hires.

The Fed’s Perspective

The Federal Reserve is keeping a close eye on these labor market shifts as it weighs its next move on interest rates. The employment cost index (ECI), a broad gauge of labor cost growth, rose 0.9% in Q2 — a slowdown from the prior quarter and less than economists expected.

• The ECI is the Fed’s preferred wage measure because it’s not distorted by shifts in employment composition.
• Wages and salaries for civilian workers increased 4.2% from a year ago, the smallest annual advance since 2021.

Yesterday, the Fed held interest rates steady at a range of 5.25% to 5.5% amid speculation that it might begin cutting rates later this year. Chair Jerome Powell emphasized that the Fed is committed to reducing inflation back to 2%. He also noted that rate cuts “could be on the table” in the September meeting, depending on “the totality of data.”

Forward-looking: The US job market may not be as hot as it once was, but it’s far from frozen solid. Hiring has slowed, but layoffs remain low, and real wage growth is still in positive territory. For the Fed, it’s a delicate balancing act of cooling inflation without tipping the economy into a deep freeze. As for job seekers, they may need to bundle up and brace for a tougher market ahead — but opportunities, though scarcer, are still out there for those willing to dig through the snow.