Labor Market Insights: July 2025

 

Now, here’s our labor market insights for July 2025 written by Matt Duffy:

Key Takeaways:

I’d be remiss if I didn’t start by throwing some shade on the new jobs report.  Headlines are touting a surprisingly strong jobs report.  The U.S. added 147,000 jobs in June – on the surface, this is very strong.  However, job growth is not widespread – the vast majority of the gains were in just three sectors: health care (+58,600 jobs), leisure and hospitality (+20,000 jobs), and state and local government (+80,000 jobs).  Outside of public sector gains, private sector businesses added only 74,000 jobs in June, the smallest monthly gain since October 2024.

Everyone has a fear or phobia.  For some, it’s a fear of enclosed spaces, flying, or spending a week with your in-laws.  For me, it’s mountain driving (which is unfortunate, because the mountains are my happy place).  I just returned from a family vacation in the mountains – and of course, we drove.  Leading up to the trip, I was nervous.  As we drove, I could see the mountains approaching, and I became even more nervous.   Then I started to drive up the mountain (one lane road, steep incline, hairpin turns – all with a massive drop off with no guardrails!).  Not surprisingly, I survived and everything was ok.  Often, the anticipation – or uncertainty – is worse than the experience itself.

The labor market is no exception.  Headlines continue to show a stable and resilient labor market (unemployment remains low, healthy job growth, and layoffs are minimal).  However, the pulse of the actual labor market feels more unstable.  Like me driving toward a mountain, I sense it’s the fear of what’s ahead that is creating much of our anxiety.  The following two graphs signify why some folks feel like they’re about to drive on a mountain road (or spend a week with your in-laws!).

At the most simplistic level, if you want a gauge of where the Labor Market is moving – the distance between the below orange and blue lines is a nice visualization (in short: we want these lines to be close together, or at a minimum, not to continually move away from each other, a continual widening gap signifies trouble ahead).  As you’ll note, in both cases, the lines are moving in the wrong direction.

National Hiring and Unemployment is painting a picture of a widening gap of two key data points:

  • The most concerning data point these days is the hiring rate, showcasing a reluctance from many organizations to hire new staff
  • The hiring rate remains stuck at levels last seen in 2014, when the U.S. economy was still emerging from the Great Recession
  • While unemployment remains relatively low, the low rate of hiring is compounding the frustration of job seekers – it’s a tough market to find a new job

 

 

The Labor Supply and Demand chart (originated from Gad Levanon with the Burning Glass Institute) tells us that:

  • Labor Demand (employment + job openings) has been growing slowly since the pandemic; however, it’s starting a downward decline
  • Labor Supply (employed + job seekers) continues to increase
  • Should the orange Demand line continue to slide, this will put significant – and continued – pressure on job seekers, ultimately spiking unemployment numbers

 

By the numbers:

  • New Jobs – the U.S. added 147,000 jobs in June, up slightly from 144,000 new jobs created in May
    • Job growth is not widespread – the vast majority of the gains were in health care (+58,600 jobs), leisure and hospitality (+20,000 jobs), and state and local government (+80,000 jobs)
    • Stripping away the public sector gains, US private sector businesses added only 74,000 jobs in June, the smallest monthly gain since October 2024
    • The three-month average job growth is at 150,000
  • Unemployment dropped slightly to 4.1%, down from 4.2% the previous month
    • The rate is higher than the 50-year low of 3.4% seen in April 2023, but lower than the rates observed in previous years leading up to the Pandemic
  • Job openings increased to 7.8 million, up from 7.4 million the previous month
    • The highest rate of 2025; however, it’s the 9th consecutive month job openings were below 8 million
    • The number of job openings increased in accommodation and food services (+314,000) and in finance and insurance (+91,000); the number of job openings decreased in the federal government (-39,000)
  • Hires ticked up to 5.6 million, up from 5.4 million the previous month
    • Not surprisingly, the number of hires decreased in the federal government (-11,000)
    • The hiring rate remains stuck at levels last seen in 2014, when the U.S. economy was still emerging from the Great Recession
  • Layoffs dropped to 1.6 million, down from 1.8 million the previous month
    • The layoff rate remains very low by historical standards
  • Quits increased slightly to 3.3 million, up from 3.2 million the previous month
    • Quits, which are seen as a measure of worker confidence in the ability to change jobs and find another one continues to remain very steady – and very low
    • The number of quits was little changed across all industries
  • Total separations dropped to 5.2 million, down from 5.3 million the previous month
    • The total separations rate remained unchanged for the fifth month in a row at 3.3 percent
  • Jobs per available worker remained steady 1.07:1
    • At its peak in 2022, the ratio was 2:1
  • LFPR (labor force participation rate) remained largely unchanged at 62.4%
    • It hit a high of 67.3% in early 2000 and fell to 63.3% in the month before the onset of the pandemic

 

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