US economic data continues to show strength and the August US Job Openings and Labor Turnover Survey (JOLTS) results were no exception. The report surprised to the upside, with an increase in job openings by 800,000 to 9.6 million versus consensus for 8.9 million.
Why was this such a surprise?
6 out of the last 7 JOLTS reports had surprised to the downside, whilst the US unemployment rate had recently slightly weakened to 3.8%.
The August JOLTS report stated that the quits rate remained unchanged at 2.3%, indicating that whilst job openings have increased and more people are looking for work, there remains a skills mismatch.
What are the implications of this for markets?
It’s all about Treasury yields! The surprise number drove yields higher, with the US 10 Year at the time of writing reaching about 4.80%, the highest level it’s been since the GFC.
Source: FactSet, Clime Investment Management
Whilst the US Federal Reserve (Fed) won’t make policy decisions based on one JOLTS report, continued signs of a tight labour market may be an indicator to encourage the Fed to hike rates again this year.
The narrative is supportive of the Fed holding rates higher for longer and markets are evidently adjusting to this. Finally, with the continued strength of the USD against the AUD, it poses a risk that the RBA needs to follow in the footsteps of the Fed and raise rates further.
Source: FactSet, Clime Investment Management
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