Labor Market Rebounds As Job Openings Unexpectedly Soar

One month after the BLS reported that in April the labor market rebounded, as the number of job openings rose sharply by 191K to 7.4 million, and far above estimates of a 7.1 million print, moments ago we got another indication that the labor market is staging a remarkable rebound when the BLS reported that in May the number of job openings soared by 374K to 7.769 million, the highest since Nov 2024 and smashing estimates of a drop to 7.3 million (from an upward revised 7.395 million print).

According to the BLS, the number of job openings increased in accommodation and food services (+314,000) and in finance and insurance (+91,000). The number of job openings decreased in federal government (39,000)..

… but the highlight is that after a mysterious spike last month which prompted us to muse if DOGE had achieved anything at all, we got a resounding answer today when the BLS confirmed that last month’s jump was an outlier and the number of Federal government job openings tumbled by almost a third, from 128K to just 89K, the lowest since covid.

In  the context of the broader jobs report, it appears the US labor market may have dodged a bullet because whereas in March the labor market was almost demand constrained, when there were just 117K more openings than jobs in the US, since then the differential has risen and in May the number of job openings was 532K more than number of employed workers, suggesting the onset of a labor recession has once again been punted.

As noted previously, until this number turns negative – which it almost did but may have now averted for the foreseeable future – the US labor market is not demand constrained, and a recession has never started in a period when there were more job openings than unemployed workers.

Said otherwise, in May the number of job openings to unemployed rose for the first time in months, from 1.0x to 1.1x.

While the job openings data was a surprising big beat and continued rebound, there was some mixed news on the hiring side where the number of new hires dipped modestly to 5.503 million from 5.615 million, which was the highest in over a year, so hardly screaming collapse in the labor market. Meanwhile, the number of workers quitting their jobs – a sign of confidence in finding a better paying job elsewhere – rose modestly after dropping the previous month, and in May it grew to 3.293 million from 3.215 million.

How to make sense of this sudden improvement in the labor market? 

Well it may have to do with the DOL starting to factor in the collapse in the shadow labor market – the one dominated by illegal aliens – and the replacement of illegals with legal, domestic workers. And since this will surely lead to higher wages, we doubt many Trump supporters will hate the development, even if it means an increase in inflation down the line.