Job Openings Reach One-Year High as Labor Market Remains Resilient
This week’s economic data includes: (1) Job Openings and Labor Turnover Survey (JOLTS) for May, (2) job creation and employment situation for June, (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 May JOLTS report painted a picture of a labor market that remains remarkably balanced and resilient, with job openings rising to a one-year high, available jobs roughly matching the number of unemployed workers, and the economy continuing to exhibit a “low-hire, low-fire” dynamic despite modest increases in layoffs and slower hiring activity.
Job openings edged up to 7.59 million in May, the highest level since May 2024 and well above expectations, signaling that labor demand remains stable. The job openings rate held steady at 4.6%, while its three-month moving average has continued to trend higher since reaching a low last December. Gains were broad-based across several sectors, including leisure and hospitality, wholesale trade, manufacturing, and construction, although partially offset by declines in health care, finance, and other services. The ratio of job openings to unemployed workers improved to 1.04, indicating that available jobs continue to roughly match the number of unemployed workers and that the labor market remains broadly balanced.
At the same time, the labor market continues to reflect a “low-hire, low-fire” environment. Hiring edged down to 5.17 million, while layoffs increased modestly to 1.71 million but remained relatively stable on a three-month moving-average basis. Voluntary quits also rose slightly, though workers continue to show caution about changing jobs, with the quits rate holding steady at 1.9%. Overall, the May JOLTS report points to a labor market that remains stable and balanced, characterized by steady labor demand, limited layoff activity, and job openings that continue to closely match the number of unemployed workers.
June’s employment report showed a labor market that is cooling but remains resilient, with slower hiring offset by limited layoffs, steady wage growth, a decline in broader underemployment (U-6), and enough underlying strength to keep the Federal Reserve focused primarily on inflation.
June’s employment report suggests the labor market is continuing to cool, but not cracking. Payrolls increased by 57,000, well below expectations and accompanied by downward revisions to April and May totaling 74,000 jobs. Hiring was concentrated in higher-skilled service sectors such as professional and business services, healthcare, and education, while leisure and hospitality experienced its largest job loss since December 2020. On a three-month moving-average basis, job growth slowed to 111,000, indicating a clear moderation in hiring momentum.
The details beneath the headline point to a labor market that remains stable but is becoming less broad-based. Construction and manufacturing posted modest gains, supported in part by ongoing data center investment, while information employment continued its longer-term decline. The unemployment rate edged down to 4.2%, and the broader U-6 unemployment rate—a wider measure of labor market slack that includes unemployed workers, individuals marginally attached to the labor force, and those working part time for economic reasons—fell to 7.9%, reflecting some improvement in overall labor market conditions. Although labor force participation declined to its lowest level since March 2021, the movements in both the unemployment rate and participation rate may have been influenced by a statistical quirk in the household survey.
Despite slower hiring, several indicators continue to point to a resilient labor market. Layoff activity remains limited, long-term unemployment declined, and temporary help employment increased modestly, suggesting employers remain cautiously optimistic despite economic uncertainty. At the same time, wage growth held steady at 3.5% year over year and average weekly hours remained unchanged, continuing to support consumer spending. Overall, the report reinforces the view of a labor market characterized by a “low-hire, low-fire” dynamic—one that is gradually cooling rather than weakening. With labor market conditions remaining broadly stable, inflation is likely to remain the Federal Reserve’s primary focus.
Weekly jobless claims continue to paint a picture of a resilient labor market, with layoffs remaining limited and claims staying below year-ago levels, although a modest rise in continuing claims suggests hiring has become a bit more challenging for job seekers.
Weekly jobless claims data continued to signal a stable labor market, with initial claims falling to 215,000—below expectations and below year-ago levels for the twentieth consecutive week—while the four-week average also edged lower, pointing to continued low layoff activity. Although continuing claims rose modestly and suggest that unemployed workers may be taking somewhat longer to find new jobs, they remain well below year-ago levels. Overall, the data reinforce the view of a labor market characterized by limited layoffs, steady employment conditions, and a somewhat slower pace of hiring.
Markets responded positively to signs of a cooling economy, with stocks rallying on easing Fed concerns, oil prices stabilizing as Middle East tensions moderated, Treasury yields moving higher, and investors continuing to anticipate a single Fed rate cut later this year.
Equity markets delivered a strong performance during the holiday-shortened week, with the Nasdaq gaining 2.1% and the S&P 500 rising 1.8%, supported by a softer-than-expected June jobs report that eased fears of additional Federal Reserve rate hikes. The weaker payroll data also triggered a rotation within the market, as investors took profits in AI-related and other high-growth technology stocks and shifted toward more defensive sectors such as healthcare and consumer staples. Year to date, major indexes remain firmly positive, led by the Russell 2000 (+20.7%), followed by the Nasdaq (+11.1%), Dow (+10.1%), and S&P 500 (+9.3%).
In energy markets, oil prices were relatively stable as shipping activity through the Strait of Hormuz continued to normalize and negotiations between the United States and Iran remained ongoing. Despite little movement in crude prices during the week, both spot and futures prices remain above pre-conflict levels. Gasoline prices declined modestly nationwide and in California, providing some relief to consumers, although prices remain significantly higher than they were before the Middle East conflict began earlier this year.
Meanwhile, Treasury yields moved higher across the curve, with the 10-year Treasury yield rising 11 basis points to 4.49%. While weaker labor market data reduced concerns about additional Fed tightening, it was not enough to reverse earlier increases in rates. Market expectations for Federal Reserve policy changed little during the week, with investors continuing to anticipate a single 25-basis-point rate cut as early as October. However, expectations for additional rate cuts beyond that eased modestly, reflecting a slightly less accommodative outlook for monetary policy.
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DETAILED ANALYSIS:
JOLTS – May Update:
The Bureau of Labor Statistics reported that job openings edged up by 9,000 in May to 7.59 million, from a revised 7.58 million in April (previously reported as 7.62 million), and came in well above expectations of 7.30 million. This marks the highest level since May 2024 and suggests labor demand remains stable. On a year-over-year basis, job openings increased by 284,000.
Meanwhile, the job openings rate—a measure of labor demand relative to total employment—held steady at 4.6%, unchanged from April. On a three-month moving average basis, the measure has shown a clear upward trend since reaching its low in December. Prior to that, it had trended downward from the peak reached in April 2022 through December.
Job openings increased notably in leisure and hospitality (+95,000), wholesale trade (+71,000), manufacturing (+33,000), and construction (+32,000). These gains were largely offset by declines in health care and social assistance (-115,000), finance and insurance (-69,000), and other services (-54,000). The increase in leisure and hospitality openings may reflect stronger hiring activity ahead of the FIFA World Cup. Regionally, job openings rose in the Midwest and South, while the West and Northeast experienced declines.
The ratio of job openings to unemployed workers—a key measure of labor market balance the Fed watches closely—rose to 1.04 from 1.03 in April, driven primarily by a decline in unemployment. This indicates that available job openings continue to roughly match the number of unemployed workers, suggesting a labor market that remains broadly balanced.
Hiring edged down by 45,000 to 5.17 million in May, reflecting broad-based declines across several sectors, including transportation, warehousing and utilities (-40,000), wholesale trade (-20,000), and construction (-24,000). The hiring rate—a measure of hires as a percentage of employment—held steady at 3.3%, while the three-month average improved to 5.31 million, continuing the modest upward trend that began last November.
Layoffs edged up by 41,000 to 1.71 million in May, coming in above both April’s level and expectations. The increase was driven primarily by health care and social assistance (+53,000), construction (+47,000), and retail trade (+43,000). The layoff rate—a measure of layoffs as a percentage of employment—rose slightly to 1.1% from 1.0% in April. However, the three-month moving average held essentially flat at 1.75 million, indicating little change since March. On a year-over-year basis, layoffs were up 2.2%.
Voluntary quits edged up by 22,000 to 3.07 million in May, exceeding both April’s level and market expectations. The increase was driven primarily by gains in accommodation and food services (+37,000) and transportation and warehousing (+32,000). The quits rate—a measure of voluntary separations as a percentage of employment—held steady at 1.9%, while the three-month average ticked up to 3.09 million. Even so, quits have remained within a relatively narrow range over the past ten months, suggesting workers continue to be cautious about leaving their jobs.
Overall, the May JOLTS report points to a labor market that remains broadly stable, characterized by a continued “low-hire, low-fire” dynamic and a balanced job market, with job openings roughly matching the number of unemployed workers.
Job Creation and Employment Situation – June Update:
Overview
According to the Bureau of Labor Statistics, businesses added 57,000 jobs in June, bringing total payroll employment to 159.0 million from 158.9 million in May—an increase of 0.04% month over month. This marks the fourth consecutive month of job gains, although the pace of growth continues to slow and came in well below expectations of 113,000. Job growth was concentrated in higher-income, higher-skilled service sectors, including professional and business services, healthcare and social assistance, and educational services, which more than offset a significant decline in leisure and hospitality employment.
April and May payroll gains were revised downward by a combined 74,000 jobs. April was revised to 148,000 from 179,000, while May was revised to 129,000 from 172,000. On a three-month moving average basis, payroll growth slowed to 111,000 jobs, down from 164,000 in May. While moderating, job creation remains above the estimated 30,000–50,000 breakeven level needed to keep pace with growth in the working-age population and prevent a rise in unemployment. Overall, the labor market continues to cool but remains stable, maintaining a “low-hire, low-fire” environment. With labor market conditions remaining broadly stable, inflation is expected to remain the Federal Reserve’s primary focus.
Private and Government Employment
Private-sector employment increased by 49,000 jobs in June, below expectations of 107,000 and down from a revised gain of 97,000 in May (revised from 120,000). Employment in goods-producing industries rose modestly by 10,000 jobs, up from 7,000 in May, while private services employment slowed sharply to 39,000, down from 90,000.
Government employment increased by 8,000 jobs in June, a notable slowdown from the 32,000 jobs added in May.
Industry Breakdown
Payroll growth was less broadly distributed in June, as reflected in the employment diffusion index, which declined to 54.4 from 56.0 in May.
Within goods-producing industries, construction employment increased by 11,000 jobs, led by gains among nonresidential specialty trade contractors (+14,100), supported in part by continued demand for data center development. Manufacturing added 3,000 jobs, with gains concentrated in durable goods industries, including fabricated metals, computer and electronic products, and electrical equipment and appliances.
Within private service industries, the 39,000-job increase was driven primarily by professional and business services (+36,000), healthcare and social assistance (+46,600), and educational services (+22,200).
However, leisure and hospitality lost 61,000 jobs, including declines in food services and drinking places (-33,000) and accommodations (-22,000). This marked the largest decline since December 2020 and reflected weaker-than-normal seasonal hiring following a strong increase in May, despite expectations that World Cup-related activity would support additional job growth. Retail trade also declined by 8,000 jobs.
Among sectors employing large numbers of white-collar workers and often viewed as most susceptible to AI-driven disruption, results were mixed. Information employment declined by 9,000 jobs, marking losses in 17 of the past 18 months, while financial activities employment was unchanged following a significant decline of 22,000 in May.
Government employment increased by 8,000 jobs, with gains recorded across all levels of government: federal (+2,000), state (+4,000), and local (+2,000).
Unemployment, Labor Force and Underemployment
The unemployment rate declined to 4.2% in June from 4.3% in May, coming in below market expectations of 4.3%. The improvement reflected a larger decline in unemployment than in the labor force.
The number of unemployed individuals—the numerator of the unemployment rate—fell by 213,000, or 2.9%, to 7.09 million in June from 7.31 million in May, although it remained about 40,000 higher than a year earlier. Meanwhile, the labor force—the denominator of the unemployment rate—declined by 720,000, or 0.4%, to 169.4 million from 170.1 million in May and remained 1.02 million below its year-ago level.
The labor force participation rate declined to 61.5%, down from 61.8% in May and the lowest level since March 2021. The decline was driven primarily by a drop in prime-age labor force participation (ages 25–54) to 83.3% from 83.9%, the lowest reading since December 2023. The employment-to-population ratio, a key measure of the economy’s ability to generate jobs, edged down to 59.0% from 59.2%. The movements in both the unemployment rate and labor force participation rate may have been influenced by a statistical quirk in the household survey data.
A key measure of underemployment—individuals working part time for economic reasons—declined by 124,000 to 4.81 million. As a result, the broader U-6 unemployment rate, closely watched by the Federal Reserve, fell to 7.9% from 8.1%, signaling modest improvement in overall labor market conditions.
Unemployment Duration, Layoffs and Job Indicators
The number of individuals unemployed for less than five weeks was little changed at 2.21 million in June. Meanwhile, long-term unemployment (27 weeks or more) fell by 51,000, or 2.6%, to 1.94 million, representing approximately 27.3% of total unemployment. The average duration of unemployment declined to 25.5 weeks from 26.0 weeks in May.
Permanent job losers decreased by 107,000 to 3.28 million, while the number of job leavers fell by 140,000. Employment in temporary help services increased modestly by 9,300, suggesting labor demand remains stable as employers stay cautiously optimistic but remain hesitant to commit to broader full-time hiring amid ongoing economic uncertainty.
Wages and Hours
Average hourly earnings increased 0.3% month over month in June, unchanged from May and in line with expectations. On a year-over-year basis, wage growth accelerated slightly to 3.5%, up from 3.4% in May and consistent with market expectations. Both the three-month average monthly and annual wage growth measures remain aligned with June’s readings.
Average weekly hours worked held steady at 34.3 hours. Overall, wage growth remains stable and continues to support consumer spending while remaining broadly consistent with a gradually moderating labor market.
Weekly Jobless Claims – Week Ending June 27:
The Labor Department reported that initial jobless claims declined by 1,000 to 215,000 for the week ending June 27, down from 216,000 the prior week (revised up from 215,000) and below expectations of 218,000. Claims have remained below year-ago levels for a twentieth consecutive week. The four-week moving average edged down by 2,500 to 222,000, suggesting the labor market remains stable and resilient, with layoffs continuing to remain at a low level.
Continuing claims, which measure the number of individuals receiving unemployment benefits, increased modestly by 2,000 to 1.814 million for the week ending June 20, coming in below expectations. While this marks the highest level since late March, continuing claims remain well below the 1.954 million recorded a year earlier. The insured unemployment rate held steady at 1.2%, while the four-week moving average of continuing claims rose by 10,750 to 1.803 million, suggesting that unemployed workers may be taking somewhat longer to secure new employment. Overall, the data continue to point to a labor market characterized by low layoffs but a somewhat slower pace of hiring.
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WEEKLY MARKET ANALYSIS:
Equity Market
Equity markets posted solid gains during the holiday-shortened week, with the Nasdaq rising 2.1% and the S&P 500 advancing 1.8%, despite markets being closed on Friday for the Independence Day holiday. Gains were supported by a softer-than-expected June payroll report, which helped ease concerns about additional Federal Reserve rate hikes. The report also sparked a sector rotation, with investors taking profits in AI-related and other high-growth technology stocks while shifting toward more defensive sectors such as healthcare and consumer staples.
Weekly and Year-To-Date (YTD) Performance Highlights:
· Nasdaq: +2.1% (weekly) & +11.1% (YTD), closing at 25,833
· S&P 500: +1.8% (weekly) & +9.3% (YTD), ending at 7,483
· Dow Jones Industrial Average: +2.0% (weekly) & +10.1% (YTD), closing at 52,900
· Russell 2000: -0.5% (weekly) & +20.7% (YTD), ending at 2,996
Oil Market and Gasoline Price
For the week ending July 3, 2026, crude oil prices were little changed, as commercial shipping activity through the Strait of Hormuz continued to gradually recover and negotiations between the United States and Iran remained ongoing. Brent crude increased $0.13, or 0.18%, from $71.99 to $72.12 per barrel, while West Texas Intermediate (WTI) declined $0.51, or 0.74%, from $69.20 to $68.69 per barrel.
In the futures market, December 2026 Brent crude settled at $72.37 per barrel, up $0.25, or 0.35%, from the prior week. December 2026 WTI rose $0.38, or 0.56%, to $68.28 per barrel from $67.90. Relative to current spot prices, December 2026 Brent remains slightly higher by $0.25, while WTI is modestly lower by $0.41.
Further out on the curve, December 2027 futures also moved higher, with Brent increasing $0.47, or 0.67%, to $70.34 per barrel and WTI rising $0.63, or 0.96%, to $66.34 per barrel. Despite recent moderation, oil prices remain above the low-$60 range seen prior to the Middle East conflict earlier this year.
On the consumer side, the national average gasoline price declined $0.09 to $3.81 per gallon, according to AAA. However, prices remain elevated, up $0.83, or 27.7%, from $2.98 per gallon at the onset of the Middle East conflict in late February 2026.
According to the Department of Energy, California’s average regular gasoline price declined $0.14, or 2.6%, to $5.25 per gallon for the week ending June 29. Even with the recent decline, prices remain $0.77, or 17.2%, above the pre-conflict level of $4.48 per gallon.
Treasury Market
For the holiday-shortened week ending July 3, with markets closed on Friday, Treasury yields increased across the curve. The benchmark 10-year Treasury yield rose 11 basis points to 4.49%, despite weaker-than-expected June payroll growth of 57,000 jobs. While the softer labor market data reduced concerns about additional Federal Reserve tightening, it was not enough to offset earlier increases in yields, resulting in a net rise in rates for the week.
Key Treasury Yield Movements:
· 2-year yield: 4.14% (+0.07%)
· 5-year yield: 4.23% (+0.11%)
· 10-year yield: 4.49% (+0.11%)
Rate Cut Expectations
As of June 26, markets were fully pricing in a single 25-basis-point rate hike as early as October, with no additional hike expected thereafter. However, a residual 20% to 40% probability of an additional rate hike remained priced into meetings between December and July 2027.
As of July 3, market expectations were largely unchanged, continuing to anticipate a single 25-basis-point rate hike as early as October, with no additional hikes thereafter. However, the residual probability of a second-rate hike between December and July 2027 declined modestly compared with the prior week, reflecting a slightly less accommodative policy outlook.
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NEXT WEEK’S ECONOMIC CALENDAR:
Key scheduled releases include:
· 7/6 (Monday)
o ISM Services Index for June
· 7/8 (Wednesday)
o MBA Mortgage Applications for July 3
o FOMC Meeting Minutes
o Consumer Credit for May
· 7/9 (Thursday)
o Weekly Initial Jobless Claims & Continuing Claims
o Existing Home Sales 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: 07.03.2026 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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All content available on this material is general in nature, not directed or tailored to any particular person, and is for informational purposes only. Any of its content is not offered as investment advice and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. The information contained herein reflects the opinions and projections of Commercial Bank of California (CBC) as of the date hereof, which are subject to change without notice at any time. CBC does not represent that any opinion or projection will be realized. The information contained herein has been obtained from sources considered reliable, but neither CBC nor any of its advisors, officers, directors, or affiliates represents that the information presented on this material is accurate, current, or complete, and such information is subject to change without notice.
