Evening Brief – 08.29.23
JOLTed
Federal Reserve Chair Jerome Powell delivered his annual Jackson Hole, Wyoming, speech last Friday, outlining what economic data must fulfill to avoid further interest rate hikes.
The Job Openings and Labor Turnover Survey (JOLTS) likely confirmed one of Powell’s concerns on Tuesday, with job openings falling to their lowest level in more than two years.
The consensus was for a slight decrease from 9.582 million to 9.46 million. Instead, the BLS reported only 8.827 million job openings, the first number below nine million since March 2021. It was also the third-largest miss on record. This figure follows 9.16 million (revised from 9.58 million) openings in June.
While one month does not indicate a trend, three months does as the three-month decline was 1.5 million, the second worst on record, trailing only the economic shutdown during Covid.
The number of job openings dropped the most in the following industries: professional and business services (-198,000), health care and social assistance (-130,000), state and local governments (-67,000), state and local governments (-62,000), and the federal government (-27,000).
Meanwhile, job openings increased in information (+101,000) and in transportation, warehousing, and utilities (+75,000).
The drop in the number of job openings meant that July was just 2.986 million more than the number of unemployed workers, the lowest since August 2021. Put another way, there were only 1.51 job vacancies available to unemployed people, which is the lowest level since September 2021.
The number of people quitting their jobs, an indicator that is traditionally closely associated with the strength of the labor market because it shows workers are confident that they can find a better wage elsewhere, fell by 253K to just 3.549 million, the lowest since February 2021
As for the Federal Reserve, now that the labor market may be showing signs of cracking (a sub-9 million print indicates that interest rate hikes are negatively influencing the economy), it’s no surprise that the odds of another raise this year have decreased to 42% from 47% following the data release.
We get non-farm payrolls for August on Friday, and if the JOLTS data is reflected in the jobs report, then the central bank may have to begin to place more weight on the timing of the first interest rate cut than the potential for another hike.