US JOLTS Preview: Job Openings above 10 million could seal two more Fed rate hikes in 2023

• JOLTS report will be watched closely by Fed officials this week.
• Job openings are forecast to fall below 10 million in May.
• US labor market conditions remain out of balance despite tight Fed policy.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Thursday, July 6, by the US Bureau of Labor Statistics (BLS). The publication will reveal the change in the number of job openings in May, alongside the number of layoffs and quits.

JOLTS data will be scrutinized by market participants as it could provide valuable insights regarding the supply-demand dynamics in the jobs report. 

What to expect in the next JOLTS report?

The number of job openings on the last business day of May is forecast to decline to 9.93 million from 10.1 million in April. "Over the month, the number of hires changed little at 6.1 million. Total separations decreased to 5.7 million," the BLS said in April’s JOLTS. "Within separations, quits (3.8 million) changed little, while layoffs and discharges (1.6 million) decreased."

The Federal Reserve (Fed) has been paying close attention to the job openings data to assess whether labor market conditions remain tight. In May, the BLS reported that there were more than 6 million unemployed. Following the June policy meeting, Fed Chairman Jerome Powell acknowledged that they were observing sings of softening in the labor market but noted that demand and supply were still out of balance. Nearly 10 million job openings for around 6 million unemployed means that there are still more than 1.5 jobs for each person looking for work. Fed officials are concerned that the slow recovery in the supply side of the labor market could lead to higher wages and make it difficult for them to bring inflation back to target.

FXStreet Analyst Eren Sengezer thinks that a reading above 10 million could feed into expectations for two more 25 basis points Fed rate hikes in the remainder of the year.

“Following three straight months of declines, the number of job openings rose back above 10 million in April,” Eren notes. “Another reading above 10 million should allow the Fed to continue to raise rates without worrying about hurting the labor market. On the other hand, a noticeable decline toward 9.5 million could cause hawkish Fed bets to recede at least until Friday’s jobs report.” 

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

Job openings data will be published on Thursday, July 6, at 14:00 GMT. The report could influence the US Dollar’s (USD) valuation, with market participants trying to figure out whether the Fed will continue to tighten the policy later in the year. “We believe there's more restriction coming, driven by labor market,” Powell said when speaking at a policy panel at the 2023 ECB Forum on Central Banking.

Eren shares his views on how EUR/USD could react to JOLTS data:

“The Relative Strength Index (RSI) indicator on the daily chart declined below 50 and EUR/USD closed below the 20-day Simple Moving Average on Wednesday, pointing to a bearish tilt in the short-term outlook. With an upward surprise, the pair could continue to stretch lower. In that case, 1.0820 (100-day SMA) aligns as key support. A daily close below that level could open the door for an extended slide toward 1.0760 (static level) and 1.0700 (psychological level, static level”

"A noticeable decline in job openings could weigh on the USD and help EUR/USD recover toward 1.0900 (psychological level, 20-day SMA). If the pair rises above that level and confirms it as support, 1.0950 (static level) and 1.1000 (psychological level) could be set as next bullish targets."