The employment market appears to have lost some of its sizzle, a development that could influence Federal Reserve policy and further raise concerns about an economic recession among investors.

Job openings have been edging lower since April as rising inflation tightened its grip on businesses and crimped consumer spending. In June, openings fell to 10.7 million, their lowest levels since September. Openings are still at an historically high level, having never exceeded 8 million in a month prior to a year ago.

On Friday, the Labor Department issues its report on hiring for July. Economists expect the report to show employers hired 250,000 workers last month. That would be down from 372,000 jobs created in June and the smallest increase this year. The unemployment rate is expected to hold steady at 3.6%.

The Fed has been aggressively raising interest rates in an effort to slow the economy and cool the hottest inflation in four decades. The central bank has raised its key short-term interest rate to the highest level since 2018.

A key concern from Wall Street is that the Fed’s rate hikes could be too aggressive and push the economy into a recession. Such concerns weighed on stocks for the first half of the year, but the market rallied in July as investors bet the Fed could soon ease up on the pace of the rate increases.

The labor market has remained strong despite inflation’s grip on the broader economy, with job openings far outpacing people seeking employment. A tighter job market could be a signal that the economy is slowing enough for the Fed to be less aggressive. It would also be a sign that inflation itself, particularly with wages, could be easing up.

“We need fewer job openings, which reduces the chances of bidding wars for talent and we’re starting to see that,” said ” Jeff Buchbinder, equity strategist for LPL Financial.

It has been a strong jobs market, though, which helped counter worries that the economy is already in a recession. The economy has contracted for two straight quarters, which is a long-held informal definition of a recession, as spending eases. Economists and analysts have said that strong employment has helped shield the broader economy from slipping into a recession, or at least getting mired in a long recession with a deep impact.

“What we have right now doesn’t seem like (a recession),” said Fed chair Jerome Powell, after the central bank’s most recent policy meeting in July. “And the real reason is that the labor market is just sending such a signal of economic strength that it makes you really question the GDP data.”