Job Openings Increase as May Hiring Beats Expectations and Treasury Yields Rise

This week’s economic data includes: (1) Job Openings and Labor Turnover Survey (JOLTS) for April, (2) job creation and employment situation for May, (3) weekly initial jobless and continuing claims, and (4) market trends across equities, oil and Treasury markets along with rate-cut expectations.

KEY SUMMARY:

The April JOLTS report showed that job openings surged but were narrowly concentrated, while hiring slowed, quits declined, and layoffs remained contained—pointing to a stable but restrained “low hire, low fire” labor market with limited inflationary pressure.

Job openings rose sharply by 731,000 in April to 7.62 million, well above expectations and marking the largest monthly increase since 2021 and the highest level since May 2024. However, the surge was highly concentrated, with professional and business services accounting for the vast majority of the increase, largely driven by small businesses. While labor demand improved overall—reflected in the job openings rate rising to 4.6% and the openings-to-unemployed ratio moving above 1—gains were uneven across industries and regions, with declines in sectors like finance, retail, and hospitality.

Despite stronger demand on the surface, underlying labor market dynamics remain subdued. Hiring fell notably and continues to hover within a narrow range, while layoffs declined but showed a gradual upward trend in the moving average. Voluntary quits dropped to their lowest level since 2020, signaling worker caution and reduced confidence in job-switching opportunities. Overall, the labor market remains stable but restrained, characterized by a “low hire, low fire” environment, suggesting limited inflationary pressure from labor conditions and allowing the Fed to stay focused on broader inflation risks.

The May jobs report showed stronger-than-expected hiring with broadening job gains and upward revisions signaling renewed labor market momentum, led by service sectors—especially leisure and hospitality—while underlying trends point to stabilizing conditions, emerging pockets of weakness, and growing concerns that cooling wage growth and persistent inflation could weigh on consumer spending, keeping the Federal Reserve focused on managing inflation risks.

The May jobs report delivered a clear upside surprise, with businesses adding 172,000 jobs—well above expectations—and extending a three-month streak of solid gains. Total employment rose to 159.0 million, and with hiring far outpacing modest labor force growth, the unemployment rate held steady at 4.3%. Upward revisions to the prior two months, along with January and February 2026—following consistent downward revisions throughout 2025—further reinforced the strength of the labor market, pushing the three-month average sharply higher and signaling renewed momentum.

What stands out is not just the pace of hiring, but its improving breadth. Job gains were more widely distributed across sectors, even as a few key industries continued to do the heavy lifting. Health care, social assistance, and leisure and hospitality remained dominant drivers, reflecting steady demand in service-based sectors. In particular, leisure and hospitality was the largest contributor to total monthly job growth, accounting for roughly 41% of the increase, supported by seasonal travel demand, hiring ahead of the World Cup across multiple U.S. host cities, and the start of the summer vacation season. At the same time, a notable rebound in local government hiring—despite its typical volatility—provided an additional lift to overall payroll growth.

Under the surface, the labor market is showing signs of stabilizing after last year’s softer patch. Private sector hiring, while moderating from April’s surge, still exceeded expectations, with steady gains in services and modest growth in goods-producing industries like construction and manufacturing. However, there are emerging signs of strain—long-term unemployment increased, and the average duration of unemployment rose, indicating that displaced workers are taking longer to find new jobs despite the overall strength in hiring.

Layoffs remain contained, hiring is picking up, and broader measures of labor utilization are improving. At the same time, wage growth is gradually cooling, suggesting that labor-driven inflation pressures are easing—for now—giving the Federal Reserve more flexibility to focus on broader inflation risks as the economic outlook evolves. However, slower wage growth also raises concerns that elevated inflation is continuing to erode purchasing power, which could begin to weigh on consumer spending.  On balance, conditions appear to be shifting away from the “low hire, low fire” dynamic that defined much of the past year.

Weekly initial jobless claims rose modestly above expectations while continuing claims edged lower, with both measures suggesting slight volatility but an overall labor market that remains stable with limited layoffs.

Weekly initial jobless claims rose by 13,000 to 225,000 for the week ending May 30, exceeding expectations and reaching the highest level since early February, likely reflecting holiday-related volatility; however, claims remain below year-ago levels and the four-week average indicates layoffs are still limited. Meanwhile, continuing claims edged down to 1.777 million—also below expectations—while remaining higher than recent months but still well below last year’s levels, with the insured unemployment rate steady at 1.2%. Overall, the data point to a labor market that remains stable despite modest near-term fluctuations.

Equity markets fell on tech-driven weakness while oil prices rose on geopolitical tensions and Treasury yields climbed, as stronger economic data led market watchers to fully price in a December 2026 Fed rate hike with roughly a 50/50 chance of additional tightening.

Equity markets declined for the week, led by a sharp sell-off in technology and semiconductor stocks following weaker-than-expected earnings from Broadcom and a stronger-than-expected jobs report that raised concerns about additional Fed rate hikes. The Nasdaq posted the steepest loss, while the S&P 500 and Russell 2000 also declined, and the Dow held relatively steady. Despite the pullback, major indices remain up year-to-date.

In energy markets, oil prices rose for the week—marking their first gain in three weeks—driven by early-week geopolitical tensions and U.S. inventory draws, though prices eased on Friday amid renewed Iran peace talks and a stronger dollar. Forward curves suggest oil prices are expected to gradually decline over time, though they remain elevated compared to pre-conflict levels. Gasoline prices declined modestly during the week but remain significantly higher than before the Middle East conflict, both nationally and in California.

In fixed income markets, Treasury yields moved higher across the curve, reflecting stronger economic data and persistent inflation pressures tied to geopolitical tensions. The 10-year yield rose to 4.55%, and the 30-year yield moved above 5%. As a result, market expectations have shifted, with the market now fully pricing in a 25-basis-point Fed rate hike in December 2026, along with roughly a 50/50 chance of an additional hike in 2027—signaling a more hawkish outlook for monetary policy.

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DETAILED ANALYSIS:

JOLTS – April Update: 

The Bureau of Labor Statistics reported that job openings rose sharply by 731,000 in April to 7.62 million, up from a revised 6.89 million in March and well above expectations of 6.87 million. This marks the highest level since May 2024, with the monthly increase the largest since April 2021. On a year-over-year basis, job openings increased by 520,000. The job openings rate—a measure of labor demand as a share of total jobs—rose to 4.6% from 4.2% in March.

However, the increase was highly concentrated. Professional and business services accounted for roughly 92% of the gain (+668,000), with small businesses (1–9 employees) driving about 86% of the overall increase (+625,000). Other sectors, including health care and social assistance (+89,000) and other services (+62,000), posted modest gains, while finance and insurance (-135,000), accommodation and food services (-74,000), and retail trade (-43,000) saw declines. Job openings remain most concentrated in professional and business services (1.72 million, ~23% of total) and health care and social assistance (1.47 million, ~19%). Regionally, all areas except the Midwest saw gains, led by a significant increase in the West (+439,000).

The ratio of job openings to unemployed workers—a key gauge of labor market balance—rose to 1.03 from 0.95 in March, indicating slightly more available jobs than unemployed workers.

Despite the surge in openings, hiring fell by 419,000 to 5.12 million in April, with broad-based declines across key sectors, including professional and business services (-131,000), retail trade (-81,000), health care and social assistance (-56,000), and accommodation and food services (-52,000). The hiring rate declined to 3.2% from 3.5%, while the three-month average held at 5.18 million—within the narrow 5.2 to 5.3 million range seen since late 2024—indicating still-subdued hiring activity.

Layoffs declined by 192,000 to 1.69 million, below both March levels and expectations, driven largely by reductions in professional and business services (-112,000) and retail trade (-88,000). The layoffs rate edged down to 1.1%, although the three-month moving average of 1.76 million continues to trend higher since December 2025. On a year-over-year basis, layoffs are down 6.9%.

Voluntary quits fell by 183,000 to 2.98 million—the lowest level since April 2020 and below expectations. Declines were broad-based, including retail trade (-48,000), professional and business services (-31,000), and transportation and warehousing (-30,000). The quits rate declined to 1.9%, and the three-month average edged down to 3.06 million, remaining within the narrow range observed over the past nine months. This suggests workers remain cautious about leaving their jobs.

Overall, the April JOLTS report points to a labor market that remains broadly stable, characterized by a continued “low hire, low fire” dynamic. While job openings surged, the gains were highly concentrated and may prove less durable. Meanwhile, subdued hiring, low quit rates, and limited layoffs suggest the labor market is not a primary source of inflation, allowing the Federal Reserve to remain focused on broader and persistent inflation pressures.

Job Creation and Employment Situation – May Update:

Overview

According to the Bureau of Labor Statistics, businesses added 172,000 jobs in May, bringing total employment to 159.0 million from 158.8 million in April – an increase of 0.11% month over month. This marks the third consecutive month of gains and comes in well above expectations of 88,000 and underlying labor force growth of just 0.05%. Job growth broadened out but remained concentrated in key sectors—particularly health care and social assistance, along with leisure and hospitality, while local government (excluding education), which is typically volatile, increased significantly, accounting for roughly one fifth of the total monthly gain.

The unemployment rate held steady at 4.3%, as employment growth outpaced labor force growth. Prior months were also revised higher, with April revised up from 115,000 to 179,000 (+64,000) and March from 185,000 to 214,000 (+29,000), bringing combined revisions to +93,000. As a result, the three-month average of job gains rose sharply to 188,000 in May, up from 79,000 in April—its strongest level since March 2024. These upward revisions extend the positive trend seen in January and February 2026, following a period of consistent downward revisions throughout 2025.

Overall, the labor market appears to be regaining momentum after a prolonged period of softer hiring last year. With hiring picking up and layoffs remaining contained, conditions may be shifting away from the “low hire, low fire” environment that has persisted. The stronger-than-expected May report also gives the Federal Reserve more flexibility to focus on inflation pressures, particularly those tied to the ongoing conflict with Iran.

Private and Government Employment

Private sector employment increased by 120,000 jobs in May, exceeding expectations of 89,000 but moderating from a revised gain of 177,000 in April. Job growth was concentrated in service-providing industries, while goods-producing employment rose modestly by 28,000. Government employment increased by 52,000, driven primarily by a 43,500 gain in the local government (excluding education), the highest level since October 2020 and more than half of the cumulative increase over the prior twelve months (83,800).

Industry Breakdown

Payroll growth was more broadly distributed in May, as reflected in the employment diffusion index—which rose to 54.4 from 54.0 in April, marking its highest level since November 2025. Leisure and hospitality led job creation, adding 70,000 jobs—well above its 12-month average of 20,000. Of these gains, 58,600 came from accommodation (+10,600) and food services and drinking places (+48,000), likely supported by hiring ahead of the World Cup being hosted across 11 U.S. cities from June 11 to July 19, 2026 as well as the start of the vacation season.

Government employment also rebounded, adding 52,000 jobs in May—primarily driven by a 55,000 increase at the local level—after shedding a cumulative 224,000 jobs over the prior twelve months.

In the private sector, healthcare added 35,200 jobs, in line with its 12-month average of 38,175, with gains concentrated in ambulatory health care services (+26,000) and hospitals (+6,000). Social assistance employment increased by 12,000, led by individual and family services (+10,000). In contrast, financial activities declined by 22,000 in May and are down 107,000 over the past 12 months, with losses in insurance carriers and related activities (-11,000) and commercial banking (-3,000). Air transportation payrolls fell by 8,700, likely tied to the recent collapse of Spirit Airlines, while the information sector shed 2,000 jobs—marking declines in 16 of the past 17 months.

Within goods-producing industries, construction employment rose by 17,000, supported by nonresidential specialty trade contractors (+11,400), driven in part by strong demand for data center development. According to recent Census Bureau data, U.S. data center construction spending surged 25.8% month over month in April, surpassing $50 billion for the first time and accounting for 2.3% of total construction spending—outpacing transportation-related public infrastructure for the first time. Manufacturing added 7,000 jobs, with gains concentrated in durable goods (+17,000), including fabricated metals and motor vehicles and parts.

Unemployment, Labor Force and Underemployment

The unemployment rate held steady at 4.3% in May, in line with expectations, as employment growth continued to outpace labor force growth. The number of unemployed individuals declined by 66,000, or 0.9%, to 7.31 million from 7.37 million in April, though it remains up 59,000 compared to a year ago. The labor force rose modestly by 83,000 to 170.1 million but is down 414,000 year over year, reflecting the combined impact of stricter immigration policies and an aging population.

The labor force participation rate was unchanged at 61.8%, matching expectations, while the employment-to-population ratio edged up 0.1 percentage point to 59.2%. A key measure of underemployment—individuals working part time for economic reasons—declined by 137,000 to 4.81 million. As a result, the broader U-6 unemployment rate, closely watched by the Federal Reserve, fell to 8.1%, signaling some improvement in overall labor market conditions.

Unemployment Duration, Layoffs and Job Indicators

The number of individuals unemployed for less than five weeks declined by 286,000 to 2.21 million in May. In contrast, long-term unemployment (27 weeks or more) rose by 155,000, or 8.5%, to 1.99 million—the highest level since December 2021—accounting for approximately 27.2% of total unemployment. The average duration of unemployment increased to 26.0 weeks from 24.4 weeks in April, also the highest since February 2022, suggesting that displaced workers are taking longer to find new jobs.

Permanent job losers declined by 126,000 to 3.39 million, while the number of job leavers increased by 72,000. Temporary help services employment edged up by 1,400, pointing to stable overall labor demand, as employers remain cautiously optimistic but hesitant to commit to full-time hiring amid ongoing economic uncertainty.

Wages and Hours

Average hourly earnings rose 0.3% month over month in May, up from 0.2% in April and in line with expectations. On a year-over-year basis, wage growth moderated to 3.4% in May, down from 3.6% in April and consistent with expectations. The three-month moving average continues to trend lower. Average weekly hours held steady at 34.3. Overall, wage growth does not appear to be a primary driver of recent inflation; instead, rising living costs are increasingly eroding consumer purchasing power, which could begin to weigh on consumer spending going forward.

Weekly Jobless Claims – Week Ending May 30:

The Labor Department reported that initial jobless claims rose by 13,000 to 225,000 for the week ending May 30, up from a revised 212,000 the prior week and above expectations of 215,000—likely reflecting some holiday-related volatility around Memorial Day. This marks the highest level since early February, though claims have remained below year-ago levels for the sixteenth straight week. The four-week moving average increased by 6,500 to 214,750, reinforcing the view that layoffs remain limited and the labor market continues to hold steady despite ongoing concerns about AI-driven job losses.

Continuing claims, which capture the number of individuals receiving unemployment benefits, declined by 8,000 to 1.777 million for the week ending May 23, coming in slightly below expectations. While this is also the highest level since late February, it remains meaningfully below the 1.896 million level seen a year ago. The insured unemployment rate held steady at 1.2%, and the four-week moving average edged up by 4,750 to 1.777 million—again signaling a labor market that remains stable overall.

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WEEKLY MARKET ANALYSIS:

Equity Market

Equity markets posted weekly losses, driven largely by a sharp sell-off in technology and semiconductor stocks on Friday following weaker-than-expected results from Broadcom and a strong jobs report that heightened concerns the Federal Reserve may need to raise interest rates to fight inflation.

Weekly and Year-To-Date (YTD) Performance Highlights:

• Nasdaq: -4.68% (weekly) & +10.62% (YTD), closing at 25,709
• S&P 500: -2.59% (weekly) & +7.86% (YTD), ending at 7,384
• Dow Jones Industrial Average: -0.32% (weekly) & +5.83% (YTD), closing at 50,867
• Russell 2000: -2.94% (weekly) & +14.17% (YTD), ending at 2,834

Oil Market and Gasoline Price

For the week ending June 5, 2026, crude oil prices posted their first weekly gain in three weeks, driven largely by escalating tensions early in the week and significant U.S. inventory draws. However, prices pulled back on Friday amid renewed peace negotiations with Iran and a stronger U.S. dollar. Brent crude rose $1.04, or 1.13%, from $92.05 to $93.09 per barrel, while West Texas Intermediate (WTI) increased $3.18, or 3.64%, from $87.36 to $90.54 per barrel.

In the futures market, December 2026 Brent crude is priced at $85.36 per barrel, up $3.50 (4.28%) from the May 29 settlement, while WTI stands at $79.46, up $1.17 (1.49%). December 2027 contracts show more modest gains, with Brent at $77.57 (up $0.82, or 1.07%) and WTI at $72.78 (up $0.83, or 1.15%). Forward curves suggest markets expect oil prices to gradually ease as geopolitical tensions subside, with year-end 2026 and 2027 prices below current levels. However, prices remain well above the low-$60 range seen prior to the Iran conflict, indicating a potentially prolonged normalization period. This reflects expected delays in repairing damaged oil infrastructure, rebuilding inventories—including strategic petroleum reserves—and higher insurance costs and wages for tankers transiting the Strait of Hormuz.

U.S. average gasoline prices, according to AAA, declined by $0.17 to $4.22 per gallon. However, since the onset of the Middle East conflict in late February 2026, gasoline prices remain up $1.24, or 41.4%, from $2.98 per gallon.

According to the Department of Energy, California’s average price for regular gasoline edged down $0.06, or 0.98%, to $5.85 per gallon for the week ending June 1. Despite the recent decline, prices remain $1.38, or 30.8%, above pre-conflict levels of $4.48 per gallon.

Treasury Market

Treasury yields surged across the curve, driven primarily by a hotter-than-expected May jobs report and persistently elevated inflation tied to the Iran conflict. The 10-year Treasury yield rose to 4.55%, while the 30-year yield moved back above 5%, reaching 5.01%.

Key Treasury Yield Movements:

• 2-year yield: 4.17% (+0.19%)
• 5-year yield: 4.29% (+0.16%)
• 10-year yield: 4.55% (+0.10%)

Rate Cut Expectations

In the prior week, markets had fully priced in a single 25 bps rate hike in March 2027, with no further hikes thereafter. This week, expectations have shifted: markets now fully price in a 25-bp hike in December 2026, followed by an additional 25 bps hike in 2027, with probabilities rising to 53% in March, 68% in April, 72% in June, and 73% in July. In addition, for the remainder of 2026, markets are assigning roughly a 50% probability to a 25-bp hike at the September and October FOMC meetings.

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NEXT WEEK’S ECONOMIC CALENDAR:

Key scheduled releases include:

• 6/9 (Tuesday)
  • NFIB Small Business Optimism for May
  • Existing Home Sales for May
• 6/10 (Wednesday)
  • CPI for May
• 6/11 (Thursday)
  • PPI for May
• 6/12 (Friday)
  • University of Michigan Sentiment for June

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For a visual representation of this week’s economic review, you can view or download the slide deck here:06.05.2026 CBC Weekly Economic Update Presentation Slides

Mark Yoon, CFA CPA
EVP & CFO of Commercial Bank of California

Thomas McCullough
EVP of Commercial Bank of California

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