The Job Openings and Labor Turnover Survey (JOLTS) provides a detailed picture of the U.S. labor market, offering insights that are crucial for forex traders.

As a measure of job openings, hires, quits, and layoffs, JOLTS helps analyze the dynamics of the labour force, which is a key element influencing U.S. economic health and monetary policy.

This data, while lagging behind other labour indicators like Non-Farm Payrolls (NFP), still holds substantial weight for forex traders, especially when predicting potential shifts in the Federal Reserve’s (Fed) monetary policy. 

What Is the JOLTS Report?

The Job Openings and Labor Turnover Survey (JOLTS) is a monthly report published by the U.S. Bureau of Labor Statistics (BLS). The JOLTS data tracks several important labour market dynamics, providing a clearer view of employment trends.

 Components of JOLTS:

• Job Openings: The number of unfilled positions in the economy. A high number of job openings can indicate a strong labor market.
• Hires: The total number of individuals hired within a month, giving insight into job growth.
• Quits: The number of voluntary separations initiated by employees, which can be a signal of confidence in the labor market.
• Layoffs: The number of workers laid off or discharged, which could signal stress in specific industries or the economy in general.

These components help to identify the underlying health of the labour market and predict future employment trends. JOLTS data is released on a monthly basis, but it often lags behind other key labour markets indicators like Initial Jobless Claims and Non-Farm Payrolls.

Why JOLTS Matters to Forex Traders

1. Insight into U.S. Employment Trends and Fed Monetary Policy

JOLTS provides forex traders with valuable insights into the labour market dynamics in the United States. The data can suggest whether the U.S. labour market is tightening or loosening, influencing consumer spending, wages, and overall economic growth.

For the forex market, JOLTS is particularly important as it offers a glimpse into the Fed’s monetary policy stance. The Federal Reserve monitors labour market conditions to decide on interest rate changes, and trends within JOLTS can signal future actions.

For instance, a high quit rate might indicate growing labour market confidence, potentially prompting the Fed to consider raising interest rates to prevent an overheating economy. Conversely, a high layoff rate could prompt dovish policy expectations.

2. Lagging Nature of JOLTS

Though JOLTS offers valuable insights, it is considered a lagging indicator in comparison to reports like the Non-Farm Payrolls (NFP) and Initial Jobless Claims.

 However, its long-term trends can provide a clearer picture of broader labour market shifts and economic confidence.

Trading Forex Using JOLTS Data

Combine JOLTS with Unemployment Data to Predict Currency Moves

When interpreting JOLTS data, forex traders often combine it with other key indicators like unemployment rates and NFP reports to predict potential currency movements.

• Strong JOLTS Data: A higher number of job openings, hires, and a rising quit rate generally indicate a strong labour market. If combined with other positive labour indicators, traders may expect USD appreciation, particularly if the data suggests the Fed will increase interest rates.
• Weak JOLTS Data: A falling number of job openings or an increase in layoffs could signal labour market weakening. Combined with disappointing NFP reports, this could lead to expectations of Fed dovishness, resulting in USD depreciation.

JOLTS and Other Employment Indicators

1. JOLTS vs. Non-Farm Payrolls (NFP)

NFP is perhaps the most widely watched employment report. It measures the number of jobs added or lost to the economy in a month. While NFP offers a more direct look at job growth, JOLTS provides a deeper understanding of labor turnover and the health of the job market.

• NFP Strength: Strong NFP reports often coincide with a positive JOLTS report, showing growth in both job creation and turnover.
• JOLTS Insights: A high quit rate could indicate a strong job market, even if the NFP report is weaker than expected, while rising layoffs in JOLTS may provide a warning signal, even if NFP is strong.

2. JOLTS vs. Initial Jobless Claims

While Initial Jobless Claims provides insight into the number of people filing for unemployment benefits, JOLTS goes deeper, measuring job turnover across different sectors. The two indicators can be complementary:

• Rising Job Openings in JOLTS with falling Initial Jobless Claims suggest a healthy economy.
• Increasing Layoffs in JOLTS with rising Jobless Claims may indicate economic stress.