The US labor market sent mixed signals in July, as job openings increased modestly while employers pulled back on hiring. The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) released Tuesday showed vacancies rose by 89,000 to 7.271 million on the last business day of July, slightly below the 7.3 million economists had expected. June's figure was revised down to 7.182 million from the initially reported 7.359 million.
The uptick in openings was driven largely by manufacturing, which added 79,000 positions, nearly all in durable goods. Professional and business services also saw a gain of 65,000 openings. The overall job openings rate ticked up to 4.4% from 4.3% in June.
However, the increase in available positions did not translate into stronger hiring. The number of hires fell by 278,000 to 5.054 million, and the hiring rate dropped to 3.2% from 3.4%. Professional and business services accounted for most of the decline, with hiring in that sector down by 188,000.
Layoffs remained historically low, providing some reassurance that the labor market is stable rather than deteriorating rapidly. Layoffs and discharges decreased by 119,000 to 1.666 million in July, and the layoff rate fell to 1% from 1.1%. This pattern of low layoffs has been a key driver of employment growth this year, even as companies become more reluctant to add workers.
At the same time, fewer workers voluntarily left their jobs, a sign that employees may be less confident about finding better opportunities elsewhere. Taken together, the data suggest a labor market that is neither collapsing nor showing the strength of a robust expansion.
"The labor market is back in the 'low fire, low hire' mode," said Heather Long, chief economist at Navy Federal Credit Union. "Companies are growing cautious as the war in Iran drags on and borrowing costs have spiked."
Fed faces inflation and employment trade-off
The latest labor data arrives as the Federal Reserve weighs competing risks from inflation and employment. A relatively stable labor market gives policymakers more room to focus on inflation, which remains above the central bank's 2% target. Fed Chairman Kevin Warsh said Friday that the central bank will "have work to do" if policymakers fail to gain sufficient confidence that inflation is moving toward the goal.
Financial markets are currently pricing in about a 66% probability of a 25-basis-point rate increase at the September 15-16 meeting, according to CME Group's FedWatch tool. The federal funds rate currently stands at 3.50%-3.75%.
Higher energy prices could complicate the outlook. The conflict with Iran has created an energy shock that is putting additional pressure on household budgets and could keep inflation elevated. That leaves the Fed facing a difficult policy environment: hiring is weakening, but price pressures may limit its ability to respond with easier monetary policy.
Friday's jobs report takes center stage
Investors will now turn to Friday's closely watched nonfarm payrolls report for a clearer picture of the labor market. A Reuters survey of economists expects payroll growth to rebound in August after employment unexpectedly declined in July. The broader trend so far this year points to a significant slowdown in job creation.
US employers, including companies, nonprofits, and government agencies, have added an average of 61,000 net jobs per month in 2026, according to AP. While that pace is weak by historical standards, it represents an improvement from 2025, when monthly job growth averaged fewer than 10,000 positions—the weakest hiring pace outside a recession since 2002, as high interest rates and uncertainty surrounding President Donald Trump's tariffs discouraged companies from expanding their workforces.
The July JOLTS data offers little evidence of either a major labor-market breakdown or a renewed hiring boom. Instead, employers appear to be maintaining a cautious balance: keeping layoffs low while limiting new hiring. That dynamic could remain important for the Fed. If employment continues to weaken without a sharp rise in layoffs, policymakers may have more time to assess whether inflation is moving sustainably lower before changing interest rates.
For now, the US labor market appears to be moving sideways, with Friday's employment report likely to determine whether that holding pattern is beginning to break. For more context, see our earlier coverage of June's job openings slide and the May openings report.
This article is for informational purposes only and does not constitute financial advice.
