US JOLTS Job Openings expected to decline in June

The US JOLTS data will be watched closely ahead of the release of the July Nonfarm Payrolls report on Friday.
Job Openings are forecast to edge lower to 7.55 million in June.
The state of the labor market is a key factor for Fed officials when setting interest rates.

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 June, 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 reaching 12 million in March 2022, indicating a steady cooldown in labor market conditions. In January of this year, the number of Job Openings came in above 7.7 million before declining to 7.2 million by March. Since then, JOLTS Job Openings rose for two consecutive months, reaching 7.76 million in May.

What to expect in the next JOLTS report?

Markets expect Job Openings for June to decline to 7.55 million. Although concerns over an economic downturn eased after the United States (US) reached trade agreements with Japan and the European Union (EU), there is still uncertainty surrounding the inflation outlook. Hence, Federal Reserve (Fed) policymakers could refrain from easing monetary policy unless labor market conditions worsen in a noticeable way.

The CME FedWatch Tool shows that markets virtually see no chance of a rate cut at the upcoming July 29-30 Fed policy meeting. Nevertheless, a significant negative surprise in the JOLTS Job Openings data, with a reading below 7 million, could feed into expectations for a 25-basis-point rate cut in September, which currently has a probability of about 60%. In this scenario, the US Dollar (USD) could come under pressure with the immediate reaction.

On the other hand, a reading near the market consensus, or better, could help the USD to hold its ground. Regardless, investors could opt to stay on the sidelines ahead of the Fed policy announcements on Wednesday, not allowing the data to have a long-lasting impact on the USD’s valuation.

Economic Indicator

JOLTS Job Openings

JOLTS Job Openings is a survey done by the US Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month.

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

Job Openings will be published on Tuesday at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:

“The near-term technical outlook points to a buildup of bearish momentum in EUR/USD. The Relative Strength Index (RSI) indicator on the daily chart declined below 50 and the pair broke below the 20-day Simple Moving Average (SMA), currently located at 1.1700.”

“On the downside, the 50-day SMA aligns as the immediate support level at 1.1560 before 1.1450 (Fibonacci 23.6% retracement of the February-July uptrend) and 1.1335 (100-day SMA). Looking north, resistance levels could be spotted at 1.1700 (20-day SMA), 1.780 (static level) and 1.1830 (end-point of the uptrend).”

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

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.

How often does the Fed hold monetary policy meetings?

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.

What is Quantitative Easing (QE) and how does it impact USD?

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.

What is Quantitative Tightening (QT) and how does it impact 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.