US JOLTS Preview: Fed expects job openings to decline

• JOLTS report will be watched closely by Fed officials ahead of July jobs data.
• Job openings are forecast to fall to 9.6 million in June.
• US labor market conditions remain out of balance despite Fed rate hikes.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday, August 1, by the US Bureau of Labor Statistics (BLS). The publication will reveal the change in the number of job openings in June, alongside the number of layoffs and quits.

JOLTS data will be scrutinized by market participants and Federal Reserve policymakers, as it could provide valuable insights regarding the supply-demand dynamics in the labor market. 

What to expect in the next JOLTS report?

The number of job openings on the last business day of June is forecast to decline to 9.6 million from 9.8 million in May. "Over the month, the number of hires and total separations were little changed at 6.2 million and 5.9 million, respectively," the BLS noted in May’s JOLTS. "Within separations, quits (4.0 million) increased, while layoffs and discharges (1.6 million) changed little."

The Federal Reserve (Fed) has been paying close attention to the job openings data to assess whether the supply-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 said that they were observing sings of labor supply and demand coming into better balance. Powell, however, noted that that labor demand was still substantially exceeding supply. In case jobs openings decline to 9.6 million in June as expected, that would translate into 1.6 jobs for each unemployed.

Fed officials are concerned that the slow recovery in the supply side of the labor market could lead to higher wages and make it difficult for them to bring inflation back to target.

FXStreet Analyst Eren Sengezer shares his view on the importance of the JOLTS Job Openings data and the potential market reaction:

“Market participants are uncertain whether the Fed will raise the policy rate again before the end of the year. Although Powell’s cautious tone regarding future policy tightening revived expectations for a no-change in the Fed policy rate in 2023, upbeat macroeconomic data releases, including the second-quarter Gross Domestic Product (GDP) growth, caused investors to scale back dovish Fed bets.”

“If there is a noticeable decline in the number of job openings, with a reading below 9 million, the US Dollar (USD) could come under renewed selling pressure. On the flip side, an increase toward 10 million would reaffirm tight labor market conditions and have the opposite impact on the currency’s performance against its major rivals.” 

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

Job openings data will be published on Tuesday, August 1, at 14:00 GMT. The report could influence the action in EUR/USD due to its potential influence on the market pricing of the Fed’s rate outlook. It’s also with noting that the Euro has been struggling to stay resilient against its rivals after European Central Bank (ECB) President Christine Lagarde refrained from confirming one more increase in key rates in September.

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

"EUR/USD dropped below 1.1000 early Tuesday and the Relative Strength Index (RSI) indicator on the daily chart retreated below 50, reflecting a bearish bias. On the downside, 1.0900 (100-day SMA) aligns as important support ahead of 1.0800 (Fibonacci 61.8% retracement of the March-July uptrend) and 1.0740 (200-day SMA)."

"In case EUR/USD reclaims 1.1000, 1.1070 (20-day SMA) could be seen as the next recovery target before 1.1100 (psychological level) and 1.1150 (static level)."