Why the New JOLTS Jobs Data Should Be Music to the Fed’s Ears (VIDEO)

Last Updated: 25.3.2024 1:49

The data in the new JOLTS Report should be music to the Fed’s ears, providing the U.S. central bank with further justification to halt rate hikes and commence rate cuts in early 2024.

The U.S. labor market, which has been out of synch for several years due to the pandemic, appears to be normalizing according to the new Job Openings and Labor Turnover Survey (JOLTS Report), released Tuesday morning.

The new JOLTS Report indicated that the ratio of job openings to unemployed workers decreased to 1.34, down from 1.5 in the previous month, marking its lowest reading since reaching 2.0 in August 2021.

The reason why a drop in this key ratio is important according to Oxford Economics lead U.S. economist Nancy Vanden Houten, is that it shows the supply and demand in the labor market coming into a better balance.

Source: Yahoo Finance YouTube

Also Read: Fed’s Top Inflation Gauge Continued Cooling in October, Signalling Interest Rate Cuts Could Be Near (VIDEO)

More importantly, the need for the labor market to achieve a better balance is something Federal Reserve Chairman Jerome Powell has mentioned on numerous occasions as a key factor in helping inflation decline to the Fed’s 2% target.

In his December 1st speech, Fed Chair Jerome Powell again spoke about the need for the economy to come into a better balance, saying:

“Labor market conditions remain very strong, and the economy is returning to a better balance between the demand for and supply of workers. The pace at which the economy is creating new jobs remains strong, and has been slowing toward a more sustainable level.”

Another key ingredient of a sustainably soft landing is falling into place as job openings fall from an originally reported 9.6m in Sep to 8.7m in Oct.

As a result, openings/unemployed down to 1.3 (was 1.5 last month and a high of 2.0). pic.twitter.com/DUQyRBkvJe

— Jason Furman (@jasonfurman) December 5, 2023

Tuesday’s JOLTS Report also disclosed that, as of the end of October, there were 8.73 million job openings, down from 9.35 million in the previous month, reaching its lowest level in over two years.

The quits rate in October came in at 2.3%, remaining flat for the fourth month in a row, marking a return to pre-pandemic levels. October also saw 5.89 million hires, which was close to flat month-over-month from September’s 5.9 million hires.

With inflation continuing its steady decline towards the Fed’s 2% target, the new JOLTS Report appears to support the growing narrative that the economy is beginning to cool off, with the once-tight labor market starting to soften, further increasing the odds that the Fed is done increasing interest rates and will likely begin cutting rates in early 2024.

The markets’ reaction Tuesday to the new jobs data was mixed with the NASDAQ Composite (IXIC) climbing +0.31%, the S&P 500 (SPX) closing near ever at -0.06% and the Dow Jones Industrial Average (DJI) closing slightly in the red at -0.22%.

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