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THE TIDE IS CHURNING: JOLTS, CONSUMER CONFIDENCE, HOME PRICES, CHICAGO PMI

Tuesday offered investors a four-course meal of economic indicators, with sweet, salty, and sour items on the menu.

The Labor Department's Job Openings and Labor Turnover Survey (JOLTS) USJOLT=ECI is a metric that follows labor market churn. Healthy churn suggests businesses are hiring and firing, and workers are willing to leave jobs for better opportunities.

Healthy churn is a symptom of a robust jobs market.

In Tuesday's JOLTS release, job openings inched 0.1% higher in May to 7.594 million. The number was 294,000 north of consensus.

The report also showed hires weakened by 0.9%, while layoffs and discharges (firings) increased by 2.5%.

Those numbers offer scant evidence against the widely held view—supported by months of low initial jobless claims—that the jobs market is idling in low-hire, low-fire mode.

Meanwhile, quits edged 0.7% higher.

The quit rate—a metric often associated with consumer expectations—held steady at 1.9%, suggesting workers are generally unwilling to walk away from a gig amid a softening jobs outlook and economic uncertainty.

"Job openings have been up in the last few months, and job growth has been steady and strong, but workers are not yet convinced that the market is swinging in their favor," says Nicole Bachaud, labor economist at ZipRecruiter.

The pullback in hiring at a time when economic and geopolitical clouds loom on the horizon echoes the downward trend in jobs confidence, as expressed by the Conference Board (CB).

CB's falling jobs confidence, part of its broader consumer confidence report released today (see below), could be a sign that workers are in danger of being discouraged right out of the labor force.

May's employment report showed labor market participation remained at 61.8% of the workforce, a repeat of April's weakest print since November 2021, when the economy was clawing its way out of the COVID abyss.

"The hiring switch needs to fully turn on for the labor market to feel alive again, and with inflation picking up and consumer confidence falling back in June, that might not come as quickly as we’d hoped," Bachaud adds.

Speaking of the Conference Board (CB), the mood of the American consumer, whose spending accounts for about 70% of the U.S. economy, improved slightly this month, albeit from a downwardly revised May reading.

CB's consumer confidence index USCONC=ECI eked out a 0.6-point gain this month to land at 91.3, a more sour reading than the 94.8 print analysts expected.

Digging deeper, survey participants' assessment of present conditions dropped by 2.5%. But near-term expectations improved by 4.2%, likely reflecting the extension of the U.S.-Iran ceasefire agreement.

"Consumer confidence inched up in June as falling oil prices in recent weeks provided some relief to consumer inflation fears,” writes Dana Peterson, CB's chief economist. “However, perceptions of the current labor market softened measurably as the percentage of consumers saying jobs were ‘hard to get’ rose to 22.5%, the highest level since January 2021."

A reminder for data geeks: a large, prolonged gap between the present situation and expectations — as seen in the graphic below — is often a harbinger of recession. So this month's narrowing of the gulf between the two should ease fears of a near-term economic downturn:

Moving over to the housing market, home prices in major U.S. cities unexpectedly were unchanged on a monthly basis in April, defying the 0.1% drop analysts expected.

Year-over-year, the Case-Shiller 20-city composite USSHPQ=ECI increased by 1.1%, an acceleration from March's 0.9% annual increase, and a tad warmer than the 1.0% consensus.

The geographic divergence appears to be widening.

"With inflation accelerating to 3.8% in April, U.S. home values have now declined in real terms for an 11th straight month, further eroding inflation-adjusted housing wealth," writes Nicholas Godec, head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices. "Monthly price movements show seasonal strength masking underlying softness."

"Geographic dispersion remains pronounced," Godec adds.

Indeed, among the cities in the composite, Chicago again led the year-over-year gainers, rising 6.5%. On the other end of the scale, home prices in Seattle were down 2.3% from last year.

Finally, Midwest factory activity expanded at a decelerated pace this month.

MNI Indicators' Chicago purchasing managers' index (PMI) USCPMI=ECI shed six points to print at 56.7, a bit stronger than the 56.0 economists expected, and easing back from its highest reading in years.

A PMI reading above 50 indicates activity expanded compared with the previous month.

On Wednesday, the Institute for Supply Management (ISM) is due to unveil its broader, nationwide PMI reading for June, which is seen holding firm at 54.0, thus enjoying its sixth straight month north of 50.

(Stephen Culp)

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