- Investors are closely monitoring the upcoming US JOLTS data in anticipation of the October employment report scheduled for release on Friday.
- Job openings are projected to dip slightly below 8 million in September.
- The condition of the labor market plays a crucial role in guiding Federal Reserve officials as they formulate monetary policy.
The Job Openings and Labor Turnover Survey (JOLTS) is set to be released on Tuesday by the US Bureau of Labor Statistics (BLS), providing crucial data on the number of job openings for September, as well as figures on layoffs and quits.
Market participants and Federal Reserve (Fed) policymakers pay close attention to JOLTS data, as it offers insights into the supply-demand dynamics within the labor market—a key element affecting wages and inflation. Job openings have been on a steady decline since peaking above 12 million in March 2022, indicating a cooling labor market. However, in August, this downward trend paused, with job openings increasing from 7.7 million to over 8 million.
What to Expect in the Upcoming JOLTS Report
Markets anticipate that job openings will be reported at 7.99 million on the last business day of September. Following the July policy meeting, Fed officials emphasized their focus on the labor market, given the positive signs of inflation moving closer to the central bank’s target.
It's important to note that while the JOLTS data reflects conditions at the end of September, the official Employment report pertains to October.
The positive employment report for September, which revealed a Nonfarm Payrolls (NFP) increase of 254,000, has led market participants to hesitate in forecasting another significant Fed rate cut at the upcoming policy meeting on November 7. Kansas City Fed President Jeffrey Schmid noted that the labor market appears to be normalizing after a period of excessive employment and unsustainably low unemployment rates, rather than facing a significant downturn.
According to the CME FedWatch Tool, markets are nearly fully pricing in a 25 basis points (bps) rate cut at the next policy meeting. Meanwhile, the probability of an additional 25 bps cut in December stands at about 72%, compared to a 27% chance of maintaining the current policy.
If the job openings data surprises positively, with a reading of 8.5 million or higher, the immediate market reaction could strengthen the US Dollar (USD) as investors reassess the likelihood of a December rate cut. Conversely, a disappointing figure at or below 7.5 million could negatively impact the USD.
In the August JOLTS report, the BLS noted, "Over the month, hires changed little at 5.3 million. Total separations changed little at 5.0 million. Within separations, quits (3.1 million) continued to trend down, and layoffs and discharges (1.6 million) changed little."
