Job openings declined for the second straight month in May as the Federal Reserve’s rate hikes slowed down overall demand. Still, the level of job vacancies—a proxy for labor demand—remained near a record high, which, in our view, was a sign of an overheated labor market

If anything, the job openings data, released by the Labor Department on Wednesday, will give the Federal Reverse another reason to stay hawkish regarding interest rate hikes.

Openings declined to 11.3 million from an upwardly revised 11.7 million in April. That pushed the vacancy rate to 6.9%, a sizable drop from 7.2% in April and the record high of 7.3% in March.

The number of openings per unemployed worker—which shows how tight the labor market is—also continued to decline for the second month in a row to 1.89 from the record high of 1.99 in March.

Both figures reaffirmed that peak labor demand was reached in March, yet the decreases may not be fast enough as far as inflation was concerned.

Job vacancy rates declined for all industries except for leisure and hospitality, as well as trade, transportation and utilities, as demand stayed strong for the two service-related industries during summertime.

Strong labor demand has been the No. 1 factor that keeps layoffs at a historic low while keeping the quit rate near a record high—at 2.8% in May. But in our estimate, such a robust level of labor demand in recent months has not reflected the real level of demand growth that has slowed down significantly.

The hiring rate, on the other hand, has been much more stable since last year, in part because of labor shortages that hampered hiring. May’s hiring rate was 4.3%.

But moving forward, an economic slowdown, hiring freezes among employers and increases in layoffs will be the main driver that will push the hiring rate lower.