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.