The JOLTS report (Job Openings and Labor Turnover Survey) unexpectedly shook up the markets in mid-week trade. The Labor Department reported on Wednesday that job openings fell to lows in 3.5 years.
The economy listed 7.673 million jobs on July 31, 2024, comparable to levels seen in January 2021. This is a 237,000 decline. Economists expected an 8.1 million job listing. Job openings fell the most for small businesses.
This data would undermine the strength of the iShares Russell 2000 ETF (IWM). While IWM stock risks falling from here, the S&P 500 (SPY) also indicated a “double top” at 5,600. Watch out for mega-cap firms like Nvidia (NVDA) and Super Micro (SMCI) pulling the large caps lower.
Small-cap firms may struggle to grow. They will cut operating costs by hiring fewer people.
The JOLTS data raises the prospects of the Federal Reserve cutting interest rates by 50 bps later this month. Markets previously expected a 25 bps cut. By the end of 2025, rates may fall by as much as 225 bps.
Counterintuitively, premium-priced technology stocks are not rallying on the prospects of lower rates. Rates are historically high and would take months to stimulate the economy. The weak job market hurts consumption, the driver of the economy. That matters more than small rate cuts.
