U.S. job openings unexpectedly increased in May, but a decline in hiring added to signs that the labor market had shifted into lower gear amid uncertainty over the Trump administration's tariffs on imports, with a 90-day pause on higher reciprocal duties drawing to an end.

Anxiety over trade policy and ebbing labor market momentum was underscored by a survey from the Institute for Supply Management (ISM) on Tuesday, with manufacturers variously describing the business environment as "hellacious" and "too volatile" for long-term procurement decisions.

Economists were mostly dismissive of the surprise rise in job openings, noting that the bulk of the increase was in the leisure and hospitality sector.

'SPENDING FATIGUE'

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

Job openings, a measure of labor demand, were up 374,000 to 7.769 million by the last day of May, the Labor Department's Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey, or JOLTS report. Economists polled by Reuters had forecast 7.30 million vacancies. There were 1.07 jobs for every unemployed person, up from 1.03 in April.

Accommodation and food services open positions surged 314,000. There were 91,000 unfilled jobs in finance and insurance. Job openings increased 60,000 in transportation, warehousing and utilities. There were an additional 60,000 vacancies in healthcare and social assistance.

But federal government job openings decreased 39,000 amid the White House's hiring freeze. The job openings rate rose to 4.6% from 4.4% in April.

Hiring, however, decreased 112,000 to 5.503 million, with declines concentrated in healthcare and social assistance, manufacturing as well as professional and business services. But hiring surged by 107,000 in accommodation and food services. The hires rate fell to 3.4% from 3.5%.

Economists say the lack of clarity on what happens after July 9, when the 90-day pause on President Donald Trump's reciprocal tariffs expires, had left businesses unable to make long-term plans. A 90-day temporary reduction in tariffs between the U.S. and China is due to end in mid-August. Treasury Secretary Scott Bessent said on Monday that trade partners could still face sharply higher tariffs next Wednesday.

Economists said the JOLTS report suggested the Federal Reserve could wait until September to resume cutting interest rates. The U.S. central bank last month left its benchmark overnight interest rate in the 4.25%-4.50% range where it has been since December.

Fed Chair Jerome Powell on Tuesday reiterated the central bank plans to "wait and learn more" about the impact of tariffs on inflation before lowering interest rates.

Stocks on Wall Street fell. The dollar was little changed against a basket of currencies. U.S. Treasury yields rose.

While the ISM's manufacturing PMI nudged up to 49.0 in June from a six-month low of 48.5 in May, anecdotes from firms indicated tariffs were taking a toll.

Machinery manufacturers said "the tariff mess has utterly stopped sales globally and domestically."

Makers of computer and electronic products said the "situation remains too volatile to firmly put such plans (long-term procurement decisions) into place."

'HELLACIOUS'

Primary metals manufacturers said "tariffs, chaos, sluggish economy, rising prices, Ukraine, Iran, geopolitical unrest around the world — all make for a landscape that is hellacious, and fatigue is setting in due to dealing with these issues across the spectrum."

Producers of transportation equipment said "the erratic trade policy with on-again off-again tariffs has led to price uncertainty for customers, who appear to be prepared to hold off large capital purchases until stability returns."

The PMI last month was likely lifted by longer delivery times, which under normal circumstances would be related to strong demand. The extensive tariffs have caused bottlenecks in the supply chain, resulting in factories waiting longer for raw material deliveries.

Manufacturing is heavily reliant on imported raw materials.

"The administration is telegraphing we can expect trade deal announcements after July 4th," said Oren Klachkin, financial market economist at Nationwide.

"However, we think the administration will leave some of the levies in place and the threat of sector-level tariffs remains on the table, so tariffs and risks around trade policy will continue to weigh on the sector."

The ISM survey's gauge of prices paid by factories for inputs ticked up to 69.7 from 69.4 in May. Its measure of manufacturing employment fell to 45.0 from 46.8 in May.

"For every comment on hiring, there were 3.2 on reducing head counts, one of the widest ratios since ISM began tracking employment comments, reflecting companies' continuing focus on accelerating staff reductions due to uncertain near- to mid-term demand," said Susan Spence, ISM Manufacturing Business Survey Committee chair.

Businesses, however, generally continued to hoard workers. The JOLTS report showed layoffs dropped 188,000 to 1.601 million in May.

Layoffs decreased considerably in professional and business services, financial activities as well as healthcare and social assistance. But they increased at retailers. The layoffs rate slipped to 1.0% from 1.1% in April.

HARD TO LAND A JOB

Those who lose jobs are, however, experiencing difficulties landing new positions. Data last week showed a surge in the number of people collecting unemployment checks to more than a 3-1/2-year high in mid-June.

A survey from the Conference Board showed the share of consumers who viewed jobs as being "plentiful" dropped to the lowest level in more than four years in June.

Economists polled by Reuters expect the government's closely watched employment report on Thursday to show the jobless rate increased to 4.3% in June from 4.2% in May. Nonfarm payrolls are forecast to rise by 110,000 jobs after advancing by 139,000 in May. The employment report is being published a day early because of the Independence Day holiday on Friday.

With opportunities becoming scarce, the tide of resignations has ebbed. The number of people quitting their jobs rose 78,000 to 3.293 million, lifting the quits rate, which is seen a gauge of labor market confidence to 2.1% from 2.0% in April.

"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.