The US labour market showed unexpected resilience in May, with job openings climbing to their highest level since November 2024. Yet on the same day, fresh data revealed that the country’s manufacturing sector remains in contraction, reflecting mixed signals for the broader economy.

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According to the Bureau of Labor Statistics, job vacancies rose by 374,000 in May to a total of 7.77 million — exceeding all estimates in Bloomberg’s economist survey. The increase was driven primarily by a surge in demand within the leisure and hospitality sector, which accounted for nearly three-quarters of the new openings. Additional gains were recorded in finance, transportation, warehousing, and healthcare.

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Despite the increase in vacancies, overall hiring fell — notably in healthcare and manufacturing — while layoffs declined to 188,000, bringing the national layoff rate down to 1%. The number of openings per unemployed worker, a key indicator tracked by the Federal Reserve, rose to 1.1 — well below the 2-to-1 peak recorded in 2022.

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The quits rate, reflecting voluntary departures by workers, ticked up slightly, suggesting some improvement in worker confidence. However, economists caution that the JOLTS survey remains volatile and subject to revisions, and alternative data from job-posting platform Indeed pointed to a decline in openings during the same period.

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Meanwhile, new data released Tuesday by the Institute for Supply Management (ISM) revealed that US manufacturing activity contracted for the fourth consecutive month in June. The ISM’s headline index rose slightly to 49, from 48.5 in May, but remains below the 50 threshold that separates expansion from contraction.

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Crucially, orders and employment indicators both fell to their lowest levels in three months. New bookings have now declined for five consecutive months, while backlogs of orders — a key gauge of demand — fell by 2.8 points to 44.3, marking a record 33-month streak of contraction.

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The report suggests that factories continue to struggle with soft demand and the after-effects of increased tariffs. A separate index tracking factory employment also dropped to a three-month low, contracting for a fifth straight month. Meanwhile, ISM’s gauge of input prices edged up to 69.7, its highest since mid-2022, underscoring continued inflationary pressure on producers.

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Despite the broader contraction, factory production itself returned to growth in June after three months of decline. Import and export activity also remained in negative territory, although the pace of decline slowed.

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The data sets a complex picture ahead of the government’s official employment report for June, due on Thursday. Markets and policymakers alike will be watching closely for signs of whether labour market strength can continue to offset emerging weaknesses in industrial output.

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