Job Openings Boast Record Highs as Labor Market Strengthens

Markets gained further insight into the health of the nation’s labor market this morning with the release of the latest monthly Job Openings and Labor Turnover Survey (JOLTS).  Job openings in July totaled record highs of 5.871 million, a 228k increase from the upwardly revised June figure.  While the steep number of openings painted a positive employment picture, the hiring rate remained unchanged at 3.6%, signaling that employers have been unable to find the talent to fill those roles.  Weighing in on the data, Kansas City Fed President Esther George commented that the labor market may already be at full strength and in line with the Fed’s rate-raising criteria.  Echoing a similar tone, Fed Official John Williams yesterday expressed his opinion that some of the recent disappointing economic data did not give the proper context for Fed near term policy, stating “I see the data releases, I’m not drawing big conclusions from them — I know that next week, I’m going to be sitting down with my staff and reading lots of materials and analysis.”   Markets are currently pricing in a 10% chance of a rate hike in September, and roughly 50% chance by year end.                   

Overseas, emerging market equities touched 13-month highs today as investors are seeking higher yields and seem willing to accept more credit risk.  Stock indexes in Taiwan and Russia led the way, each gaining nearly 0.8% on the day.  In line with equities, the MSCI Emerging Market Currency Index rose for the fourth consecutive day, bringing its gain to 1.7% over that time span.  The two outliers within emerging markets were the Philippines and Saudi Araba.  Equities in the Philippines have dropped more than 2.4% this week following president Rodrigo Duterte’s outburst against Barack Obama on Tuesday that led to the cancelling of a planned meeting between the two leaders.  Additionally, yesterday in Saudi Arabia officials announced plans to reduce budgets and cancel more than $20 billion worth of infrastructure projects, sending stocks in the region down more than 0.75%.

All three major U.S. stock indexes are trading down about 0.25% on the day, while Treasury yields and swap rates are trading around unchanged.  Both WTI and Brent crude prices are trading up 1.25% for the session as investors continue to bet on the prospects of a production freeze.