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JOLTs Job Openings Hit Another Record

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Job openings report is a good forward indicator of the labor market

The Job Openings and Labor Turnover Report (or JOLT) from the US Bureau of Labor Statistics (or BLS) is a good forward indicator of the labor market. The BLS compiles data from a random sample of private non-farm businesses. Job openings are one piece of the report. The other piece addresses hires versus separations.

May job openings up 16%

In April, there were 5.36 million job openings, up 16% year-over-year. The number of job openings came in line with the Wall Street estimate of 5.35 million and the 3.6 million average since the BLS began compiling the index in 2000. The April number was the highest since the index began in late 2000. The index bottomed out at 2.2 million in mid-2009. Most sectors reported increases in openings.

There were 5.0 million hires in May, about the same as in April. The quits rate was 2.7 million. This measures the number of people who quit their jobs and is used as an indicator of employee confidence. This number has been trending upward since last year. It’s yet another indicator that points to increased momentum in the labor market.

The quits rate is a key input for the Fed’s decision-making. As confidence improves, the Fed will begin to raise rates, which investors can trade via the iShares Barclays 20+ Year Bond Fund (TLT).

Implications for homebuilders

Job growth matters the most to homebuilders. In fact, on a conference call, Jeffrey T. Mezger, CEO of KB Home (KBH), remarked that jobs were more important than interest rates. Builders most leveraged to the lower price points, like PulteGroup (PHM) and D.R. Horton (DHI), are in the best position to take advantage of increasing job growth.

Investors interested in trading in the homebuilding sector should look at the S&P SPDR Homebuilder ETF (XHB).

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