Initial Data Show More Labor Market Cracks

Rates plummet as labor market shows further signs of deterioration. Swap rates declined dramatically after JOLTS job openings were well below the 8.1mm estimate. The data is another signal that the labor market is weakening, a troubling sign ahead of Friday’s nonfarm payrolls and unemployment rate releases. Rates fell 7-11bps across a bull steepening curve, pushing the 10-year Treasury yield to close above the 2-year yield (both are just above 3.75%). 

US job openings nose-dive to lowest level in over three years. JOLTs job openings came in at 7.673mm in July, a sharp decline from June and the lowest level since January 2021. Furthermore, June’s original reading of 8.184mm was revised lower by over 250k to 9.71mm. The fewer available job openings coincide with recent data that showed slowed hiring growth and rising unemployment. Markets will hope that this Friday’s figures show an improvement from August’s levels that caused broad panic and calls for emergency rate cuts.

Chinese services index falls, adding to economic concerns. The Caixin services index fell to 51.6 in August, below surveyed estimates of a 51.8 print and July’s 52.1 result. The release follows government data over the weekend that showed services nearly entering contraction territory. Caixin senior economist Wang Zhe said, “Surveyed companies adopted a cautious approach to hiring to save costs, leaving the labor market under pressure.”