There has been quite a sizeable reaction to today’s softer-than-anticipated job openings numbers with 24bp of a potential 25bp rate cut now priced for September (up from 23bp) while the cumulative cuts priced by the December FOMC meeting are now 58bp versus 55bp before the data. The 10Y UST is also 4bp lower. Job openings fell to 7181k in July from a downwardly revised 7357k in June (consensus 7380k) while the daily data from job postings website Indeed had pointed to a decent increase. The report also indicated a notable pick-up in layoffs from the previous trend with sizeable upward revisions.
The chart below shows the ratio of job openings (vacancies) to the number of unemployed Americans has dropped below 1 for the first time since the beginning of 2018 (excluding the pandemic), which is a clear signalling of a weakening jobs market with wage pressures quickly evaporating. Remember that in 2022 we had seen the quits rate peak at 3%, which led to real concern about staff retention that fuelled the pay rise boom. Well, today, we are down at just 2%, which is in line with historical rates of job churn that is consistent with wage growth slowing to just 3%.