JOLTS jobs data preview: Fed sees job openings drop

• The JOLTS report will be closely watched by Fed officials as they await the July jobs data.
• Job offers are expected to fall to 9.6 million in June.
• US labor market conditions remain unbalanced despite Fed rate hikes.

The US Bureau of Labor Statistics (BLS) will release the Job Offerings and Job Turnover Survey (JOLTS) on Tuesday, August 1. The publication will reveal the evolution of the number of job offers in June, along with the number of dismissals and resignations.

Market participants and Federal Reserve policy makers will look closely at the data from the JOLTS report, as it could provide valuable insight into the dynamics of supply and demand in the labor market.

What can we expect from the next JOLTS report?

The number of job offers on the last business day of June is expected to fall to 9.6 million, from 9.8 million in May. “Throughout the month, the number of hires and total separations were little changed, standing at 6.2 million and 5.9 million, respectively,” the BLS noted in the May JOLTS. “Within separations, resignations increased (4.0 million), while layoffs and casualties (1.6 million) hardly changed.”

The Federal Reserve (Fed) has been paying close attention to job openings data to assess whether supply and demand remain out of balance. In June, the BLS reported that there were more than 5.9 million unemployed. Following the July policy meeting, Fed Chairman Jerome Powell stated that there were signs that labor supply and demand were reaching a better balance. However, Powell noted that the demand for labor was still far outstripping the supply. Should job offers decline to 9.6 million in June, as expected, that would translate to 1.6 jobs for every unemployed person.

Fed officials are concerned that the slow recovery in supply in the labor market could cause wages to rise and make it harder for inflation to return to target.

eren sengezeran analyst at FXStreet, shares his thoughts on the importance of the JOLTS job openings data and the potential reaction of the markets:

“Market participants are unsure if the Fed will raise the policy rate again before the end of the year. Although Powell’s cautious tone regarding future policy tightening reignited expectations of a no rate change The Fed’s 2023 policy brief, the release of upbeat macroeconomic data, including second-quarter GDP growth, prompted investors to reduce dovish bets on the Fed.”

“If there is a notable decline in the number of job offers, with a reading below 9 million, the US dollar (USD) could come under renewed selling pressure. On the other hand, a rise towards 10 million It would reaffirm the rigidity of the labor market and would have the opposite effect on the behavior of the currency against its main rivals.”

When will the JOLTS report be released and how could it affect EUR/USD?

On Tuesday, August 1 at 14:00 GMT, the data on job offers will be published. The report could influence action in EUR/USD due to its potential influence on market pricing of the Fed rate outlook. Also keep in mind that the Euro has been struggling to hold its ground against their rivals after the president of the European Central Bank (ECB), Christine Lagarde, refrained from confirming a further hike in key rates in September.

Eren points out the key technical levels to watch for EUR/USD ahead of the JOLTS data:

“EUR/USD fell below 1.1000 early on Tuesday and the Relative Strength Index (RSI) on the daily chart pulled back below 50, reflecting a bearish bias. To the downside, 1.0900 (100 SMA days) lines up as major support ahead of 1.0800 (61.8% Fibonacci retracement of the March-July uptrend) and 1.0740 (200-day SMA).”

“Should EUR/USD rebound to 1.1000, 1.1070 (20-day SMA) could be considered the next recovery target before 1.1100 (psychological level) and 1.1150 (static level).”