Suddenly, the flow of economic news is all confused, with weak news becoming good news, at least for US investors on Tuesday.
Confused? Well, where else would a fall in job openings (a negative if it means pressure on employment) be seen as a positive than on Wall Street, where the desperation to see a rate cut from the Fed is starting to reach embarrassing levels?
The bottom line after a slide in job vacancies in April (ahead of what is hoped to be a weak May jobs report on Friday) is that this ‘weak news’ will be 'good news' if it brings a rate cut closer. And don’t worry if the news becomes really bad and jobless numbers start rising because that will bring rate cuts even closer.
That’s, of course, if there’s a drop in inflation. We will get an update on that key point next week with the May Consumer Price Index and Producer Price Indexes to be released, along with the next Fed meeting.
The CPI data will show if there has been any improvement from the poor inflation figures for the first four months of the year.
The post-meeting forecasts and comments from Chair Jay Powell will also tell us what the Fed thinks of the outlook - especially inflation. There are new economic projections and the so-called ‘dot plot’, which is the main attraction for markets with its strong hint of where the bank board members see interest rates moving in coming months.
Tuesday’s government data will help a little (not as much as stock market traders thought) by showing that US job openings fell more than expected in April to their lowest level in more than three years, a sign that the labor market is still slowing.
Job openings, a measure of labor demand, were down 296,000 to 8.059 million, the lowest level since February 2021 (in the middle of the pandemic).
Data for March was revised slightly lower to show 8.355 million unfilled positions instead of the previously reported 8.488 million. Vacancies peaked at a record 12.0 million in March 2022.
The number of people quitting their jobs rose 98,000 to 3.507 million in April.
But the US government's Bureau of Labor Statistics Job Openings and Labor Turnover Survey (or JOLTS report) figures also showed that vacancies were still well above pre-pandemic levels - so the softness is relative.
This week’s slump in oil prices won’t have an immediate impact - if it is sustained, it will show up from July onwards (because of the lag effect of price falls, if they remain in place). Oil prices were down again on Tuesday.
US financial markets are pricing in a first rate cut in September, and a second one in December.
The Bank of Canada could get there first tonight, and the European Central Bank on Thursday.