- The US JOLTS data will be watched closely ahead of the release of the January employment report on Friday.
- Job openings are forecast to reach 8 million in December.
- 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 United States (US) Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in December, 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 into 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, indicating a steady cooldown in labor market conditions. In September, the number of jobs declined to 7.44 million, marking the lowest reading since January 2021, before rising to 7.8 million and 8.09 million in October and November, respectively.
What to expect in the next JOLTS report?
Markets expect job openings to be around 8 million on the last business day of December. Following the January policy meeting, the Federal Reserve (Fed) noted that economic activity has been expanding at a solid pace, with the unemployment rate stabilizing at low levels and labor market conditions staying robust. In the post-meeting press conference, Fed Chairman Jerome Powell said that the labor market seemed to be broadly in balance.
It is important to note that while the JOLTS data refers to the end of December, the official Employment report, which will be released on Friday, measures data for January.
In December, Nonfarm Payrolls (NFP) rose by 256,000, surpassing the market expectation for an increase of 160,000 by a wide margin. Commenting on the employment situation in the US, Chicago Fed President Austan Goolsbee said: “We will have to process if retail gains were a strong holiday season or something more general.” He added that he does not see the job market as a source of inflation.
The CME FedWatch Tool currently shows that markets are pricing in a less-than-15% probability of a 25 basis points (bps) rate cut in March. Although the job openings data is unlikely to influence the Fed rate outlook, a significant negative surprise, with a reading at or below 7 million, could weigh on the US Dollar (USD) with the immediate reaction. On the other hand, the market positioning suggests that the USD doesn’t have a lot of room on the upside even if the data comes in better than forecast.
“Over the month, hires and total separations were little changed at 5.3 million and 5.1 million, respectively,” the BLS said in its November JOLTS report. “Within separations, quits (3.1 million) decreased, but layoffs and discharges (1.8 million) changed little.”
When will the JOLTS report be released and how could it affect EUR/USD?
Job opening numbers will be published on Tuesday at 15:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:
“EUR/USD returned within the descending regression channel coming from late September after failing to stabilize above its upper limit. Additionally, the Relative Strength Index (RSI) indicator on the daily chart dropped below 40, reflecting a buildup of bearish momentum.”
On the downside, 1.0200 (mid-point of the descending channel) aligns as immediate support before 1.0100 (round level) and 1.0000 (psychological level, lower limit of the ascending channel). Looking north, first resistance could be spotted at 1.0400 (50-day Simple Moving Average (SMA), upper limit of the descending channel) before 1.0500 (static level) and 1.0640 (100-day SMA).”
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.
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