October Sees a Bounce Back: US JOLTS Job Openings on the Rise!
- The highly anticipated US JOLTS data is set to grab attention as we gear up for the November employment report this Friday.
- Experts predict that job openings will stay below 8 million in October.
- The health of the labor market plays a crucial role in the Federal Reserve’s decision-making process.
Mark your calendars for Tuesday when the US Bureau of Labor Statistics (BLS) releases the Job Openings and Labor Turnover Survey (JOLTS). This report promises to unveil the latest changes in job openings for October, as well as insights into layoffs and voluntary quits.
Market analysts and Fed officials eagerly dissect JOLTS data for its telling indicators on labor market dynamics—an essential element shaping wages and inflation. Job openings have been on a downward trend since peaking at over 12 million in March 2022. By September, that figure dropped to 7.44 million, the lowest since January 2021, signaling a cooling labor market.
What Can We Anticipate in the Upcoming JOLTS Report?
Expectations are set for around 7.5 million job openings as we wrap up October. The Fed has shifted its gaze toward labor market metrics, especially with inflation trends nudging closer to the central bank’s target after their July policy discussions.
Keep in mind that while JOLTS reflects data from the end of October, the official Employment Report coming out on Friday will focus on November’s figures.
This past October, Nonfarm Payrolls (NFP) only increased by 12,000—a stark impact from recent hurricanes and labor strikes. Federal Reserve Bank of Chicago President Austan Goolsbee noted, “The labor market is near stable, full employment.” He hinted at potentially slowing the pace of interest rate reductions, as they approach a point of stable rates, emphasizing they are not “crashing through full employment.”
The CME FedWatch Tool currently indicates a 65% chance of a 25 basis points (bps) rate cut in December. Should the JOLTS report surprise us with job openings at 8 million or higher, brace for a possible US Dollar (USD) boost as investors recalibrate their expectations for a December rate cut. Conversely, a figure below 7 million could spell trouble for the USD.
“In September, hires remained steady at 5.6 million, while total separations also held at 5.2 million,” the BLS reported. “Within separations, quits (3.1 million) and layoffs and discharges (1.8 million) showed little change.”
When to Expect the JOLTS Report and Its Potential Impact on EUR/USD?
Job opening figures will drop on Tuesday at 15:00 GMT. Eren Sengezer, European Session Lead Analyst, shares insights on how JOLTS data could sway EUR/USD:
“Unless we see a significant surprise in the data, the market’s reaction to JOLTS will likely be brief, with many investors opting for caution ahead of the highly anticipated November employment figures due out on Friday.”
“The technical outlook for EUR/USD suggests a continued bearish trend. The Relative Strength Index (RSI) on the daily chart remains below 50, and the pair trades beneath the 20-day Simple Moving Average (SMA).”
“Key resistance is set at 1.0600, coinciding with the Fibonacci 23.6% retracement level of the October-December downtrend and the 20-day SMA. If EUR/USD breaks above and uses this level as support, technical buyers may step in. In that scenario, 1.0700 could emerge as the next obstacle, followed by 1.0800. On the downside, first support may be seen at 1.0400, then 1.0330 and 1.0300.”
US Dollar FAQs
The US Dollar (USD) is not just the official currency of the United States, but also a significant player in the global currency arena, often found in circulation alongside local currencies in numerous countries. It stands as the most traded currency worldwide, accounting for over 88% of all global foreign exchange transactions, averaging $6.6 trillion daily as of 2022. Following WWII, the USD eclipsed the British Pound to become the world’s reserve currency. Historically, it was backed by Gold until the Gold Standard was abandoned in 1971 with the Bretton Woods Agreement.
The Federal Reserve’s monetary policy is the biggest influencer of the US Dollar’s value. The Fed has two main objectives: to maintain price stability (control inflation) and to promote full employment. The primary tool for achieving these goals is interest rate adjustments. When inflation exceeds the Fed’s 2% target, interest rates will rise, thereby strengthening the USD. Conversely, if inflation dips below 2% or unemployment spikes, the Fed may lower rates, which could weaken the Dollar.
In extreme circumstances, the Federal Reserve can resort to printing more Dollars and implementing quantitative easing (QE). QE is a strategy where the Fed significantly increases credit flow during a financial crunch, often deemed a last resort when typical rate cuts won’t suffice. The Fed utilized QE extensively during the 2008 financial crisis, injecting funds by purchasing US government bonds from financial institutions, which generally leads to a weaker US Dollar.
Quantitative tightening (QT) is the opposite process, where the Federal Reserve stops purchasing bonds and refrains from reinvesting in new buys when existing bonds mature. This generally supports the US Dollar.
