JOLTS Data Worst Since 2021

Rates plummet after cracks show in labor data. Swap rates and UST yields crashed lower today after data revealed weaker labor demand. The Fed’s consistent citation of the robust labor market as a hurdle for rate cuts made today’s data especially noteworthy, and the 2-year yield rallied over 15bps to 4.89%, the first close below 4.90% since August 11. Meanwhile, the long-end of the curve also fell significantly, the 10-year yield now at 4.12% after an 8bp move lower.

Job openings lowest since 2021. Today’s weak JOLTS job openings of 8.827mm was the lowest since 2021 and the sixth decline over the last seven months. The “quits rate” also sank, this time to 2.3%, the lowest since 2021, which may indicate declining confidence from would-be job seekers. Still, Friday’s jobs report, which includes nonfarm payrolls, the unemployment rate, and hourly earnings, will be looked at as more relevant data.  

Incremental China rate cuts appear imminent. Following the PBOC’s reduction of its one-year loan policy rate by 10bps a few weeks ago, China announced further stimulus to come: China’s largest banks will reportedly cut their interest rates on existing deposits and mortgages. The expected cuts are estimated to equate to a reduction of the policy rate by 5-10bps, which would boost growth by another 0.1% – 0.2%. The cuts are yet another attempt to spur consumer spending, boost the flailing equities market, and alleviate pressure on lenders’ margins.