- The US JOLTS data will be watched closely ahead of the release of the April employment report on Friday.
- Job openings are forecast to edge lower to 7.5 million in March.
- 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 March, 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, the number of job openings came in above 7.7 million before declining below 7.6 million in February.
What to expect in the next JOLTS report?
Markets expect job openings to retreat to 7.5 million on the last business day of March. With the growing uncertainty surrounding the potential impact of US President Donald Trump’s trade policy on the economic and inflation outlook, Federal Reserve policymakers have been voicing their concerns over a cooldown in the labor market.
Minneapolis Fed President Neel Kashkari said last week that he is worried that businesses could start laying workers off because of the uncertainty caused by trade frictions. On a similar note, Fed Governor Christopher Waller told Bloomberg that he would not be surprised to see more layoffs and higher unemployment. “Easiest place to offset tariff costs is by cutting payrolls,” Waller explained.
It is important to note that the JOLTS report refers to the end of March, while the official Employment report, which will be released on Friday, measures data for April. Regardless of the lagging nature of the JOLTS data, a significant decline in the number of job openings could feed into fears over a weakening labor market. In this scenario, the US Dollar (USD) is likely to come under renewed selling pressure with the immediate reaction.
On the flip side, a sharp increase, with a reading above 8 million, could suggest that the labor market remains relatively stable. The CME FedWatch Tool shows that markets don’t expect the Fed to cut the policy rate at the next policy meeting in May, while pricing in a nearly 60% probability of a 25 basis points (bps) reduction in June. Hence, the market positioning suggests that a positive surprise could support the USD by causing investors to lean toward another policy hold after May.
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 opening numbers will be published on Tuesday at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:
“EUR/USD clings to a bullish stance but loses momentum, with the Relative Strength Index (RSI) indicator on the daily chart declining to the 60 region. On the downside, the Fibonacci 23.6% retracement of the February-May uptrend and the 20-day Simple Moving Average (SMA) forms a key support area at 1.1230-1.1200 ahead of 1.1050 (Fibonacci 38.% retracement) and 1.1000 (static level, round level).”
“Looking north, the first resistance level could be spotted at 1.1400 (static level) before 1.1500 (round level, static level) and 1.1575 (April 21 high).”
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.
