US JOLTS Job Openings set to show a steady labor market

US JOLTS Openings are forecast to have eased to 7.3 million in July from 7.359 million in the previous month.
Market players lift bets for a September Federal Reserve rate hike ahead of employment data releases.
EUR/USD struggles to hold 1.1600 as inflation-related concerns weigh on the mood.

The US Bureau of Labor Statistics has a busy week, releasing relevant employment data. It will start on Tuesday with the publication of the July Job Openings and Labor Turnover Survey (JOLTS) at 14:00 GMT. The report, which gathers US employers’ estimates of job openings, hires, and separations nationwide, is closely watched by the market, as it typically comes ahead of an array of employment gauges released throughout the week, culminating in the key Nonfarm Payrolls (NFP) report on Friday.

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JOLTS figures are a gauge of labor demand, though there’s a one-month delay: the data correspond to July, while the upcoming NFP report will be based on August data. Back in July, the United States (US) economy lost 23,000 jobs, which means the upcoming JOLTS release is likely to reflect tepid demand.

Generally speaking, a weak labor market leads to interest rate cuts, as central banks try to stimulate economic growth. However, at the time being, inflation is much more worrisome than the labor situation.

The Middle East conflict escalated over the weekend as Iran and the US resumed exchanging fire, pushing Oil prices sharply higher at the beginning of the week, with a barrel of West Texas Intermediate (WTI) trading above $85, suggesting energy prices are likely to push global inflation higher.

What to expect in the next JOLTS report?

As previously mentioned, the JOLTS report is expected to show job openings stood at 7.3 million in July, slightly below 7.359 million in June. The anticipated 7.3 million will remain above the 2025 average of 7.08 million openings, which means markets are unlikely to react to the headline. A reading closer to 7.08 million could be much more worrisome and negatively impact the US Dollar (USD), at least in the near term. At the other extreme, Job openings topped 7.6 million in April, suggesting a reading closer to or above the latter should boost demand for the USD.

Federal Reserve (Fed) Chairman Kevin Warsh spoke at the Jackson Hole Symposium last Friday and noted that labor conditions are consistent with full employment. He also said that this resilience provides little comfort regarding price pressures, as wage growth and consumer demand complicate the path to disinflation. Chair Warsh was clear: the labor market is not a problem, inflation is. His words fueled speculation that the central bank will deliver an interest rate hike at its meeting later this month, and the JOLTS Job Openings report has no chance of altering such sentiment.

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, and ahead of the release, the EUR/USD pair is struggling to retain the 1.1600 level, having pierced the benchmark at the weekly open amid renewed Middle East tensions.

Valeria Bednarik, FXStreet Chief Analyst, notes: “EUR/USD retreats after trading as high as 1.1710 in mid-August, but so far, the decline seems corrective. The daily chart shows that the pair battles around a mildly bullish 20-day Simple Moving Average (SMA) while bouncing from around a flat 100-day SMA. The same chart shows technical indicators pared their slides after nearing their midlines and are posting modest bounces, suggesting buyers are willing to add at these levels.”

Bednarik adds: “The 100-day SMA at around 1.1570 provides immediate support ahead of the 1.1520 price zone. If the latter gives up, EUR/USD could extend its slide towards the 1.1460 area, while additional slides will signal that bears took control. Resistance, on the other hand, comes at 1.1650, followed by the August top around 1.1710. Further gains seem unlikely in the current risk-averse scenario and as long as investors keep betting for a September Fed hike.”

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

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.