Good morning! We got more data on Wednesday that pointed to more weakening in the labor market.

Friday we’ll get the August jobs report — but already we’re seeing a noteworthy reaction in the bond market.

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The bond market is speaking

It’s not getting any easier for Americans to secure a job. 

Total job openings in July fell to the lowest level since the start of 2021, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, also known as JOLTS.

The preliminary figure dropped to 7.67 million from a downwardly revised 7.91 million the prior month, lower than consensus estimates.

Layoffs, meanwhile, climbed to 1.76 million — the most since March of last year.

Central bankers tend to monitor the ratio of empty jobs per unemployed worker. That fell to 1.1 in July, the lowest since 2021 and well below the 2-to-1 ratio seen in 2022.

The hiring rate, according to BLS, clocked in at 3.5% on the month. That’s a slight improvement from June’s 3.3%, but not upbeat on balance. 

The quit rate touched 2.1%, which economist Guy Berger of the Burning Glass Institute said appears consistent with the labor market in late 2016 to early 2017.

“But that was a period of gradual improvement in the labor market, and unfortunately we’re currently headed in the opposite direction,” Berger wrote in a note Wednesday.

All told, the report lined up with recent concerns from the Fed and economists that the jobs market is getting weaker and labor demand is softening.

“As Chairman Jerome Powell said recently, further cooling of the job market is unwelcome,” said Bankrate senior economic analyst Mark Hamrick.

“But that is exactly what the JOLTS update conveys.”

Remember in August, the government revised its job growth data by 818,000 in the 12 months to March, lowering the non-farm payroll count by about 0.5% in that stretch. 

Stocks tumbled Wednesday, continuing the day before’s red and jittery trading.

The bond market reaction, however, was more notable.

Treasury yields fell, with that on the two-year note dipping below the 10-year yield for just the second time since 2022.

“This softening of labor conditions has yield watchers dialing up the odds of a half percentage point reduction at the Fed’s next meeting [September 18],” said Jose Torres, a senior economist with Interactive Brokers. 

Many on Wall Street have long considered the inverted yield curve a harbinger of a recession. To some, the warning sign has lost its bite since the pandemic, as its predictive power has floundered.

The yield curve has been inverted for a historic 27 months without a meaningful economic slowdown. 

That said, even a momentary dis-inversion is worth keeping tabs on.

Any further signs of labor market weakness — which could come as soon as the August jobs report due Friday — could reinforce worries of a recession and send short-term yields lower once more. 

To that point, Morgan Stanley analyst Sam Coffin pointed out in a note last night that seasonal job trends don’t bode well for the next data dump.

Over the last two decades excluding 2020-2021, payrolls have slowed in August in 15 of 19 years, he said, with an average shortfall of 30,000 jobs.

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Elsewhere:

📉Nvidia extended its losses. The chip-maker shed another 1.4% on Wednesday, bringing its total loss over the last five days to nearly 17%. It opened the start of the week with the largest single-day stock plunge ever, wiping out some $280 billion in market value. (Yahoo Finance)

💵Dollar Tree stock tanked 22%. Wall Street sold the stock after the retailer reported far weaker earnings than expected on Wednesday. Executives pointed to the challenging macro landscape as reason for slowing business. By the end of the trading day, Dollar Tree was the worst performer in the entire S&P 500. (Barron’s)

🏀 Dick’s Sporting goods issued a warning on the economy. Despite strong earnings and an updated full-year guidance, Dick’s full-year outlook included caution. The sporting goods brand joins other retailers that have recently pointed to a bleak rest-of-year due to inflation and a slowdown in consumer spending. (CNBC)

Rapid-fire:

• Mortgage rates fell again to their lowest level since April 2023 (Bloomberg)

• Atlanta Fed president Bostic said the Fed cannot wait for inflation to hit 2% before cutting rates (Yahoo Finance)

• The S&P 500’s utilities sector is now the best-performing group of the index this year (WSJ)

• Trump Media stock has erased all its 2024 gains (CNBC)

• The White House is signaling that it will likely stop Nippon Steel’s plans to buy US steel (AP)

• Investors are struggling to reconcile a market where everything looks great but nothing seems worth buying (WSJ)

Last thing:

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