U.S. Job Openings Rise Unexpectedly in May Despite Weaker Hiring and Tariff Uncertainty

The U.S. labor market showed mixed signals in May, as job openings surged unexpectedly while hiring slowed, adding to concerns that economic momentum may be losing steam amid escalating trade policy uncertainty.

According to the Labor Department’s latest Job Openings and Labor Turnover Survey (JOLTS), job vacancies jumped by 374,000 to 7.77 million in May—well above economists’ expectations of 7.3 million. The rise in openings pushed the ratio of jobs to unemployed individuals to 1.07, up from 1.03 in April.

However, the increase in job openings was largely concentrated in the leisure and hospitality sector, which saw a gain of 314,000 positions, raising questions about the sustainability of demand across other industries. Transportation, warehousing, healthcare, and finance also recorded modest increases in vacancies, while federal government job openings fell by 39,000 amid an ongoing hiring freeze.

In contrast, hiring fell by 112,000 to 5.5 million, with significant declines in healthcare, manufacturing, and professional services. The hires rate dipped to 3.4% from 3.5%, though the accommodation and food services sector saw a 107,000 increase in new hires, offsetting declines elsewhere.

Tariff Uncertainty Clouds Outlook

The labor market slowdown comes as businesses remain uncertain about the future of U.S. trade policy. A 90-day pause on President Donald Trump’s reciprocal tariff hikes is set to expire next week, with officials warning that higher duties could resume if negotiations falter.

Treasury Secretary Scott Bessent indicated on Monday that U.S. trade partners could face sharply increased tariffs beginning July 9. Economists say the policy volatility is making it difficult for companies to plan ahead, particularly in manufacturing sectors that rely on imported raw materials.

“We suspect underlying demand for new workers continues to recede amid growing signs of consumer spending fatigue,” said Sarah House, senior economist at Wells Fargo.

A separate report from the Institute for Supply Management (ISM) reinforced those concerns. While the ISM manufacturing PMI ticked up slightly to 49.0 in June, from 48.5 in May, it remained below the 50 threshold that separates expansion from contraction. Business sentiment captured in the survey described the landscape as "hellacious," citing tariffs, geopolitical unrest, and rising input costs.

Manufacturers of primary metals, electronics, and transportation equipment all pointed to erratic trade policies as a major drag on investment and procurement decisions. Many firms reported delaying or cancelling large capital purchases due to pricing instability.

“The erratic trade policy with on-again off-again tariffs has led to price uncertainty,” one respondent noted. “Customers appear prepared to hold off large purchases until stability returns.”

Federal Reserve in Wait-and-See Mode

The mixed labor data has fueled speculation that the Federal Reserve may delay further interest rate cuts. The central bank held its benchmark rate steady at 4.25%–4.50% in June and Chair Jerome Powell said Tuesday the Fed would “wait and learn more” about the inflationary impact of tariffs before making its next move.

Some analysts believe the Fed could resume rate cuts in September if economic data weakens further.

Layoffs Down, But Job Seekers Face Tougher Market

Despite the hiring slowdown, layoffs declined by 188,000 to 1.6 million in May, with reductions in healthcare, finance, and business services. The layoffs rate fell to 1.0%, down from 1.1% in April. However, layoffs increased in the retail sector, highlighting uneven conditions across industries.

Still, Americans who lose their jobs are having a harder time finding new ones. Unemployment claims have risen to their highest level in more than three years, and consumer confidence in the job market is waning. A recent Conference Board survey showed the share of Americans who believe jobs are “plentiful” dropped to its lowest level in over four years.

Thursday’s closely watched monthly employment report is expected to show a modest gain of 110,000 nonfarm jobs in June, with the unemployment rate ticking up to 4.3% from 4.2%. The report is being released a day early due to the Independence Day holiday.

Workers Less Confident to Quit

Reflecting increased caution, the number of Americans voluntarily quitting their jobs—a measure of labor market confidence—rose by just 78,000 to 3.29 million in May. The quits rate inched up to 2.1% from 2.0%.

“We do expect the June employment report to show a slower pace of job growth and an uptick in the unemployment rate,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

With trade tensions unresolved and hiring on a downward trend, economists warn that even strong job openings may not be enough to sustain economic growth in the months ahead.