EconoFACTS

July 01, 2025 | 10:49

Still Plenty of Job Openings, But ....

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Got to handle it to Fed Chair Powell.... sticking to the script... he cannot sway from it in the slightest. At the annual ECB Forum on Central Banking in Sintra this morning, the head of the Federal Reserve did just that. Emphasized that they are watching the data (data dependent), the Fed is taking its time and that it is the "prudent" thing to do to "wait and see" what the effects of the tariffs will be. They do expect to see higher inflation readings "over the summer". The Fed is not taking any meetings off the table; in fact, they're taking this "meeting by meeting" and will, again, watch the data.

Note 1: He received a round of applause when he said "We're focussed on price stability".
Note 2: Governor Ueda tends to get the crowd laughing at these events....

Anyhoo.... let's take a look at some of the data that have emerged this AM:

Job openings.... there are still alot of them! In fact, in May, there were 7,769k positions available to be filled, which is up 374k from April. That works out to 1.07 jobs per unemployed individual. The labor market is still tight. Keep in mind two words... skills shortage? Big increase in job openings in the leisure & hospitality sector, as well as health care & social assistance.
Construction spending slipped 0.3% in May. This was more than expected, but there were benchmark revisions... note that the prior three months were revised higher. For the latest month, there was less spending for residential (-0.5%) and non-residential (-0.2%). Breaking it down by who was paying.... the private sector cut back (-0.5%) while the government stepped into the fray... public spending rose 0.1%.
Manufacturing is contracting but at a slower rate. The ISM manufacturing rose 0.5 pts to an above-expected 49.0 in June, the highest in three months. That's good news but that's still the fourth consecutive month <50. In fact, over the past 32 months, it has only been >50 twice (in January and February of this year).

That might be it for the good news. The details were a bit more disturbing. Driving the increase was the 4.9 pt jump in production to a 4-mth high of 50.3. (The 90-day pause may have played a role... note that both of China's manufacturing PMIs rose to a 3-mth high as well in June.) Inventories also climbed 2.5 pts to a 2-mth high of 49.2. However, new orders shrank... the component fell 1.2 pts to a 3-mth low of 46.4, employment was down 1.8 pts to a 3-mth low of 45.0, and supplier deliveries were less delayed (yes, it is a weird concept but that weighs on the headline).

Of the 18 industries in the survey, 9 of their representative purchasing managers raised their hand when asked "Who's growing?" That's two more than in May but only one more than a year ago. The comments were, as usual, telling. I was unable to find anything positive .... all the posted comments reference tariffs, and most referenced unrest in the Middle East. One comment was made about China's hold on rare earth materials. Some words/phrases that were used included "orders have collapsed" (machinery); "just the beginning" (primary metals); and, "a landscape that is hellacious" (primary metals).

Bottom Line: Need some clarity on tariffs... certainty on what the tariff rates will be and what they will cover. The uncertainty is putting the brakes on business planning. Meantime, the Fed is likely to stay on hold this summer (certainly in July) but we're still comfortable (for now) with our expectation for the next cut to come after Labor Day.