US JOLTS job openings expected to decline slightly in December
- 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).”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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