US JOLTS Preview: Job openings seen slightly lower in August

• The US JOLTS data will be watched closely by investors ahead of the September employment report.
• Job openings are forecast to stay below 8 million for the third consecutive month in August.
• Markets try to figure out whether the Fed will opt for another large rate cut at the next meeting.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Tuesday by the US Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of job openings in August, alongside the number of layoffs and quits.

JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights regarding the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job openings have been declining steadily since coming in above 12 million in March 2022, pointing to a steady cooldown in labor market conditions. In July, the number of job openings declined to 7.673 million, marking the lowest reading since January 2021.

What to expect in the next JOLTS report?

"Over the month, hires changed little at 5.5 million," the BLS noted in its July JOLTS report. "Separations increased to 5.4 million. Within separations, quits (3.3 million) and layoffs and discharges  (1.8 million) changed little."

Markets expect job openings slightly lower at around 7.65 million on the last business day of August. Federal Reserve (Fed) policymakers have made it clear after the July policy meeting that they are shifting their focus to the labor market, given the encouraging signs of inflation retreating toward the central bank's target. While speaking at the post-meeting press conference after the September meeting, "upside risks to inflation have diminished and downside risks to labor market have risen," Fed Chair Jerome Powell said.

The CME FedWatch Tool currently shows that markets are pricing in a nearly 40% probability of one more 50 basis points (bps) rate reduction at the next policy meeting in early November. In case there is a significant decline, toward 7 million, in the JOLTS Job Openings data, the immediate reaction could hurt the US Dollar (USD) with investors leaning toward a large interest rate cut. On the other hand, a reading above analysts' expectations could ease concerns over the labor market outlook and support the USD. 

When will the JOLTS report be released and how could it affect EUR/USD?

Job openings numbers will be published on Tuesday, October 1, at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his view on the potential impact of JOLTS data on EUR/USD:

"Unless there is a significant divergence between the market expectation and the actual print, the market reaction to JOLTS data is likely to remain subdued, with investors refraining from taking large positions ahead of the September employment report on Friday."

"Nevertheless, EUR/USD's near-term technical outlook suggests that the bullish bias remains intact. The Relative Strength Index (RSI) indicator on the daily chart holds near 60 and the pair trades within the ascending regression channel started in late June. In case EUR/USD stabilizes above 1.1200 (static level) and starts using this level as support, it could target 1.1275 (July 18, 2023, high) and 1.1320 (upper limit of the ascending channel) next. On the downside, the 20-day Simple Moving Average (SMA) aligns as interim support at 1.1100 before 1.1070 (lower limit of the ascending channel) and 1.1030 (50-day SMA)."