America’s job openings peaked at 12 million in March 2022. Since then they have continued to decline. Consider this… The United States Bureau of Labor Statistics (BLS) is set to release the newest data from the Job Openings and Labor Turnover Survey (JOLTS) on Wednesday. Analysts predict a continuing decline in job openings as they go down to around 7.4 million in July, down from 7.437 million in June. This expected decrease is indicative of a cooling labor market and is likely to stoke fears about the strength of America’s employment landscape.
The JOLTS report will be published at 14:00 GMT, just days before another vital labor report—the Nonfarm Payrolls data for August—scheduled for release on Friday. Analysts and market participants are closely monitoring these indicators to gauge the direction of the U.S. economy and its labor market.
In January 2023, job openings jumped to over 7.7 million. By March, that number continued to drop pretty much every week down to 7.2 million. Any reading of job openings lower than 7 million is a signal that things are getting worse in the labor market. This increasing reliance on yuan could prove detrimental to the value of the USD.
Recent Employment Trends
Future employment growth looks dismal. With the BLS’s most recent employment report, Nonfarm Payrolls were up only 73,000 in July. We’re looking at a measly 28 percent of the projected rise of 110,000. Furthermore, upcoming month revisions showed a downward revision of 125,000 and 133,000 for May and June, respectively. These figures have been accompanied by rising fears about the robustness of labor market strength.
Even Fed Chairman Jerome Powell has recently conceded that downside risks to the labor market are on the rise. He pointed out that this is the net result of recent immigration policies, which have caused a sudden stop in labor force growth. This loss of available workers could put even more pressure on the historic number of job openings and employment opportunities in all sectors of the economy.
“Tighter immigration has led to an abrupt slowdown in labor force growth.” – Fed Chairman Jerome Powell
This downward trend in Job Openings, of course, fits with what Powell described last week as building pressures from a hot labor market. With economic conditions changing rapidly, these emerging trends may force the Fed to return to a dovish posture.
Market Reactions and Future Implications
This expected drop in Job Openings is likely to affect market sentiments and trading strategies — especially with respect to the USD. Another labor market report as soft as September’s could increase speculation on when the Federal Reserve might first cut interest rates. Should inflation fall under 2%, the Fed can justify lowering interest rates. Or they might do so in reverse, should unemployment spike beyond a set level, intending to increase government borrowing and economic activity. Such steps would create strong downward pressure on the Greenback.
Turning to the technical outlook, Eren Sengezer, FXStreet’s European Session Lead Analyst, is focusing EUR/USD technical forecast. In the last few months, he’s given us some great nuggets right before the JOLTS release. According to him, provided that the resistance at 1.1670 remains strong, sellers could potentially return to the market. On the negative side, he noted support at 1.1510-1.1500, then more levels at 1.1425 and 1.1200.
“In case 1.1670 remains intact as resistance, technical sellers could be interested. On the downside, 1.1510-1.1500 (100-day SMA, round level) could be seen as the next support level before 1.1425 (Fibonacci 23.6% retracement of January-July uptrend) and 1.1200 (Fibonacci 38.2% retracement).” – Eren Sengezer
That’s why market observers are eagerly awaiting each new JOLTS report. Given Nonfarm Payrolls data are looming this Friday, this report is poised to offer key perspective into U.S. labor trends.
The Broader Economic Context
Our unique labor market reality is symptomatic of wider economic hardships that have developed in the wake of the pandemic. The drop in job vacancy reflects an unmistakable shift in hiring strategy. Employers are clearly responding in real-time to changing economic conditions and consumer demand. For all these challenges, policymakers are presented with a conundrum of addressing these evolving dynamics while ensuring a fundamental stable economic environment to thrive.
As San Francisco Fed President Mary Daly said recently, it is important to act with urgency on the state of the labor market. She noted that we can’t wait for 100 percent certainty before acting on decisions that may impact job creation.
“They can’t wait for perfect certainty without risking harm to the labor market because it will take time before they know whether tariff-related price increases will be a one-off.” – San Francisco Fed President Mary Daly
Policymakers are especially attuned to the tug-of-war between inflationary pressures and labor market trends. They want to prevent bubbles — the economic undermining of their efforts.