- The US JOLTS data will be watched closely by investors ahead of the release of the October employment report on Friday.
- Job openings are forecast to retreat slightly below 8 million in September.
- The state of the labor market is a key factor for Fed officials when setting policy.
The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in September, alongside the number of layoffs and quits.
JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job openings have been declining steadily since coming in above 12 million in March 2022, pointing to a steady cooldown in labor market conditions. In August, however, the downward trend halted as the number of job openings climbed above 8 million from 7.7 million in August.
What to expect in the next JOLTS report?
Markets expect job openings to come in at 7.99 million on the last business day of September. Federal Reserve (Fed) policymakers have made it clear after the July policy meeting that they are shifting their focus to the labor market, given the encouraging signs of inflation retreating toward the central bank’s target.
It is important to note that, while the JOLTS data refers to the end of September, the official Employment report measures data for October.
The upbeat employment report for September, which showed that Nonfarm Payrolls (NFP) rose by 254,000, caused market participants to refrain from pricing in another large Fed rate cut at the policy meeting to be held on November 7. Assessing the recent employment data, Kansas City Fed President Jeffrey Schmid argued that the labor market was normalizing after a period of record over-employment and untenable low unemployment rates, rather than an outright deterioration.
The CME FedWatch Tool currently shows that markets are nearly fully pricing in a 25 basis points (bps) rate reduction at the next policy meeting. Meanwhile, the probability of one more 25 bps rate cut in December currently stands at around 72%, against a 27% chance of a policy hold.
In case there is a positive surprise in the job openings data, with a reading of at or above 8.5 million, the immediate reaction could boost the US Dollar (USD) by causing investors to reassess the probability of a December rate cut. On the other hand, a disappointing print at or below 7.5 million could hurt the USD.
“Over the month, hires changed little at 5.3 million. Total separations changed little at 5.0 million,” the BLS noted in its August JOLTS report. “Within separations, quits (3.1 million) continued to trend down and layoffs and discharges (1.6 million) changed little.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
When will the JOLTS report be released and how could it affect EUR/USD?
Job openings’ numbers will be published on Tuesday at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his view on the potential impact of JOLTS data on EUR/USD:
“Unless there is a significant divergence between the market expectation and the actual print, the market reaction to JOLTS data is likely to remain short-lived, with investors refraining from taking large positions ahead of the third-quarter Gross Domestic Product (GDP) data and the October employment report, which will be published on Thursday and Friday, respectively.”
“EUR/USD’s near-term technical outlook suggests that the bearish bias remains intact. The Relative Strength Index (RSI) indicator on the daily chart stays below 40 and the 20-day Simple Moving Average (SMA) continues to move away from the 100-day SMA after completing a bearish cross late last week.”
“On the upside, 1.0870 (Fibonacci 23.6% retracement level of October downtrend, 200-day SMA) aligns as key resistance. If EUR/USD rises above this level and starts using it as support, technical buyers could take action. In this scenario, 1.0930 (Fibonacci 38.2% retracement, 100-day SMA) could be seen as the next bullish target before 1.1000 (round level). Looking south, first support could be spotted at 1.0770 (end-point of the downtrend) before 1.0700 (round level) and 1.0620 (static level from April).”
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.
