Stocks Level Off Following “JOLTS Shock”

Stocks slipped slightly today as fresh jobs data prompted investors to reassess their expectations. The tech sector, which had been performing well, leveled off, with the Nasdaq Composite barely moving. The S&P dipped by 0.2% while the Dow fell by approximately 0.4%.

This shift in market sentiment comes as November’s strong rally fades into the background. The optimism that the Federal Reserve might soon halt rate hikes is waning, and investors are now turning their attention to upcoming labor market data for signs of a potential “soft landing” for the US economy.

The Job Openings and Labor Turnover Survey (JOLTS) released today revealed a significant drop in job openings, falling to 8.733 million, the lowest since March 2021. This figure was a stark contrast to the expected modest decrease from September’s 9.553 million openings. The actual decline would have been even more dramatic if the original (aka, not revised) September figure had been used, marking one of the largest monthly drops on record.

Furthermore, the Bureau of Labor Statistics has been revising several job openings figures downward, indicating that the Federal Reserve may have been basing its summer rate hikes on inaccurate data. The most notable decreases in job openings were in health care and social assistance, finance and insurance, and real estate and rental and leasing. Conversely, there was a slight increase in the information sector.

The ratio of job openings to unemployed workers dropped to 1.34, nearing pre-COVID levels and significantly lower than the early 2022 peak. Additionally, the number of people quitting their jobs, a key indicator of labor market strength, also saw a modest decline.

This data paints a picture of a labor market that is not as robust as previously thought, with both job openings and hiring rates on the decline. The report’s impact was immediately felt in the stock market, with stocks that had been trading low before the report experiencing a surge. This reaction suggests a return to the mindset where bad economic news is perceived positively by the market, as it could prompt the Federal Reserve to intervene and potentially stimulate the economy.

The reliability of the JOLTS data is also under scrutiny, as the response rate for the survey has plummeted to a record low of 32%, meaning a significant portion of the data is estimated. In a time when it’s crucial for the current administration to maintain the appearance of a strong labor market, there’s room for speculation on whether these estimates are overly optimistic.

As the Federal Reserve faces the reality of a weakening labor market, the stock market is reacting in real-time, with investors recalibrating their strategies based on the latest economic indicators. More jobs data is due out later this week, and with a Fed wrapping up on December 13th, a slew of soft data plus a dovish Fed could swoop in just in time to rescue bulls and set up for a big “Santa Rally” to finish out the year.


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