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Could Increasing Job Openings Mean Trouble for Markets?

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Updated

US job openings at an all-time high 

The Bureau of Labor Statistics released its JOLTS (Job Openings and Labor Turnover Survey) data for January on March 16. According to the report, the total number of job openings on the last day of January was 6.3 million, an impressive increase from the 5.6 million job openings seen in December, and the highest reading since the beginning of the survey in 2000. The previous high was 6.1 million job openings in September 2017.

JOLTS data is collected through a monthly survey of job openings, number of new employees hired, number of employees who have quit or have been asked to leave, and other job separations. A total of 16,000 US businesses in government, private, and non-farm sectors are included in this survey.

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Why should we track job openings?

The JOLTS report gives us an idea of labor force demand in the United States. If the number of job openings continues to increase amid low unemployment, wages could increase. Labor unavailability could force companies to pay higher wages to attract employees. Increasing wages are a key driver of inflation (TIP) growth, which is a key metric considered by central bankers in policy decisions.

Importance of JOLTS data

Employment health is paramount in any economic cycle. Increasing job opportunities and aggregate demand are a positive sign for the economy. These increases could lead to higher inflation, which could force the US Fed to increase interest rates to combat rising inflation (VTIP). This fear of rising rates, which was triggered by higher average hourly wage growth in January, led to a sudden spike in volatility (VXX) and a 10% correction of equity indexes (VOO) at the beginning of February. Any labor market surprises could also impact the bond (BND) and currency (UUP) markets, which are affected by interest rate decisions. In the next part of this series, we’ll look at another important component of the JOLTS data.

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