• JOLTS report will be watched closely by Fed officials ahead of August jobs data.
• Job openings are forecast to decline to 9.46 million on the last business day of July.
• 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 29, by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in July, alongside the number of layoffs and quits.

JOLTS data will be scrutinized by market participants and Federal Reserve policymakers because it could provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor driving up salaries and inflation. 

What to expect in the next JOLTS report?

The number of job openings on the last business day of July is forecast to decline to 9.46 million from 9.58 million in June. "Over the month, the number of hires and total separations decreased to 5.9 million and 5.6 million, respectively," the BLS  noted in June’s JOLTS. "Within separations, quits (3.8 million) decreased, while layoffs and discharges (1.5 million) changed little," the publication further read.

The Federal Reserve (Fed) has been paying close attention to the job openings data to assess whether the equilibrium between supply and demand in the labor market remains out of balance. In June, the BLS reported that there were more than 5.95 million people unemployed. Hence, the ratio of available jobs to job seekers stood at around 1.6. In July, the number of unemployed declined slightly to 5.84 million. Even if the number of job openings were to decline to 8.76 million in July, that would still result in 1.5 available jobs for each unemployed.

“Job openings have declined substantially without increasing unemployment –a highly welcome but historically unusual result that appears to reflect large excess demand for labor,” said Federal Reserve Chairman Jerome Powell in his speech at the Jackson Hole Symposium on Friday. Powell further added that the Fed expects the rebalancing in the labor market to continue, but noted that it would call for a policy response if they were to see evidence that “the tightness in the labor market is no longer easing.”

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

“Market participants are fairly certain that the Fed will leave its policy rate unchanged at its September meeting. They are, however, yet to decide whether the Fed will raise the policy rate again before the end of the year. According to the CME Group FedWatch Tool, the probability of the Fed lifting the interest rate by another 25 basis points in 2023 holds at around 50%.”

“If there is a significant decline in the number of job openings, with a reading below nine 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