US JOLTS Job Openings set to decrease as markets seek clues on Fed’s rate path
- The US JOLTS data will be watched closely ahead of the release of the September Nonfarm Payrolls report on Friday.
- Job Openings are forecast to edge lower to 7.1 million in August.
- The state of the labor market is a key factor for Fed officials when setting interest rates.
The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the United States (US) Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of Job Openings in August, alongside the number of layoffs and quits. Markets expect Job Openings in August to decline slightly to 7.1 million compared to the previous month’s reading of 7.181 million.
JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights into the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job Openings have been declining steadily since reaching 12 million in March 2022, indicating a steady cooldown in labor market conditions. In January of this year, the number of Job Openings came in above 7.7 million before declining to 7.2 million by March. Since then, JOLTS Job Openings rose for two consecutive months, reaching 7.7 million in May. Nevertheless, summer months highlighted a further softening in labor, with openings sliding below 7.2 million in July.
What to expect in the next JOLTS report?
Job Openings are expected to edge lower to 7.1 million in August. Fed policymakers have been growing louder in pointing out their concerns over the labor market outlook.
Following the decision to lower the policy rate by 25 basis points at the September policy meeting, Fed Chair Jerome Powell acknowledged that job gains are running below the breakeven rate. On a more dovish note, Fed Governor Michelle Bowman argued that the recent downward revisions to employment data suggest that the Fed is even further behind the curve on interest rate cuts than previously estimated. Similarly, Kansas City Fed President Jeffrey Schmid explained that the September rate cut was appropriate to offset risks to the labor market but added that recent data point to rising risks.
The CME FedWatch Tool shows that markets nearly fully price in another 25 bps rate cut in October, while seeing about a 30% probability of a policy hold in December. A significant negative surprise in the JOLTS Job Openings data, with a reading well below 7 million, could feed into expectations for two more rate cuts and weigh on the US Dollar (USD) with the immediate reaction.
Conversely, a reading near or above the market consensus could help the USD stay resilient against its peers, at least until Friday’s Nonfarm Payrolls official employment report for September.
Economic Indicator
JOLTS Job Openings
JOLTS Job Openings is a survey done by the US Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month.
When will the JOLTS report be released and how could it affect EUR/USD?
Job Openings will be published on Tuesday at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:
“The near-term technical outlook points to a lack of directional momentum. The Relative Strength Index (RSI) indicator on the daily chart stays close to 50 and the pair trades at around the 20-day and the 50-day Simple Moving Averages (SMAs).”
“On the downside, the 100-day SMA forms a critical support level at 1.1600 ahead of 1.1530 (Fibonacci 23.6% retracement of the February-September uptrend) and 1.1300 (Fibonacci 38.2% retracement). Looking north, resistance levels could be spotted at 1.1800 (round level), 1.1920 (September 17 high) and 1.2000 (static level, round level).”
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.