The “quits” rate time series produced by the Job Openings and Labor Turnover Survey (JOLTS) is a leading indicator of US hourly pay. As wages account for around 55% of a product’s or service’s price, wage inflation and overall inflation rates tend to be closely related. Former Federal Reserve chief Janet Yellen was known to pay close attention to the quit rate but whether new Fed chief Jerome Powell regards the indicator with as much interest is as yet unknown.
Figures released as part of the most recent JOLTS report show the quit rate edged up from 2.3% of the non-farm workforce at the end of June to 2.4% in July. Quit rates were highest in the “accommodation and food services” and “other services” sectors while the “retail trade” and “health care and social assistance” sectors each recorded falls.
Reactions by financial markets were indicative of higher future US interest rates. The yield on US 2-year Treasury bonds increased by 4bps to 2.74% while 10-year yields moved up 5bps to 2.98%. According to federal funds futures prices, the probability of a rate rise at the September FOMC meeting are close to a certainty at just under 100% while the likelihood of another increase in December moved from 77% to 79%. The US dollar was up against the yen but almost unchanged against sterling and the euro.