The latest Job Openings and Labor Turnover Survey (JOLTS) for the month of May came in at 8.14 million, beating Wall Street expectations of 7.95 million. In addition, layoffs and separations came in higher at 1.65 million in May, while the number of voluntary quits also moved upward to 3.46 million.

Macquarie head of economics David Doyle joins Catalysts to give insight into the JOLTS data and what it signals about the labor market moving forward.

"I'll tell you what I'm watching most closely is the wage growth numbers. So we had seen some deceleration in the wage growth numbers heading into the last employment report, then we got some very strong monthly numbers coming out of that. If we start to see that subside again, it will further reinforce the disinflation narrative. However, if those wage growth numbers remain strong, that I think could be more concerning in terms of anticipating when the Fed might cut next," Doyle tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Nicholas Jacobino

Video Transcript

Talk to me about your reaction to this jolts data.

Obviously, the headline number coming in a bit stronger.

But does that revision stick out to you?

Which of those two feels like the driver of the market action here?

Well, look, I I think uh typically you would see the market focus more on that headline number.

So I think the number for May, the actual number reported is probably driving the the market reaction.

Um Look, I I think overall though we need to be cognizant of, of where we're coming from, right?

There's been a few months now where where the jolts or job openings number has shown a sharp decline.

A tick back up is not altogether surprising given the context there.

So I wouldn't, I wouldn't necessarily be overly concerned that the labor market is heating back up as a result of these, these data.

In fact, it makes some sense to me that we're stabilizing potentially after a few months of a sharp downturn.

Yes, certainly.

And David, as we think about kind of going forward from here, we're going to be waiting for a few more pieces of employment situation data to come over the course of this week.

What do you need to see within that data to signal that the FED can continue to kind of rest on where it's seeing the employment of the labor economy move so that they can continue to kind of isolate and attack inflation.

Yeah.

So look, I think Chair Powell has been pretty clear that he is prepared to ease if the if the labor market shows a an undesirable deceleration or an undesirable weakening.

Now, what that means uh remains to be seen.

Um But, but he's been clear that he's willing to do that.

I think that's a very important feature of the markets right now is that the fed policy put is there.

So if you do see the labor market, you know, stall out or start to show unemployment rising more than is desirable, the fed will be there and will be willing to, to ease, you know, earlier and potentially more aggressively um than they otherwise would.

I'll tell you what I'm watching though most closely uh uh is the wage growth numbers, right?

So we had seen some deceleration in the wage growth numbers heading into the last employment report.

Um Then we got some very strong monthly numbers coming out of that.

If we start to see that subside again, it will further reinforce the disinflation narrative.

However, if those wage growth numbers remain strong, that I think could be more concerning in terms of anticipating when the fed might cut.

Next.

I do want to get your take on some additional data here, which is the GDP data, the US GDP in the second quarter probably expanded by 1.7% down from 2.2% according to the most recent estimates from the Atlanta fed GDP.

Now indicator obviously that's still growth.

But the uh one handle versus the two handle on that data, does that start to concern you at all?

I not look not overly so I I think that you know about where we are now, you know, is, is roughly in line with trend, maybe slightly below trend growth.

I think if we started to move, you know, into the low one handle, that would be more concerning for the FED because it might imply that again, you would see a an undesirable rise in in the unemployment rate.

Um But 17, you know, in the 1.5 to 2.5% range, I I'm not too questioned about that.

Uh I, I do think that now there are some, you know, I know that number was above 4% the Atlanta fed estimate back in the middle of May.

Uh I think now I I it's close to bottoming out.

There are some I I would say fairly um low bars for that for the incoming data to clear.

Now in order for that number to stabilize, for example, the consumption data that goes into the, the GDP, the Atlanta S estimate is implying, you know, a paltry gain of just 0.1% month on month and real spending growth for June.

And, and I suspect you'll come in, you know, potentially above that.

So I, I think, you know, it's, it's been encouraging to see the US slow towards trend because I think that's been a big part of what's allowed disinflation to set in in the economy.

Um And, and our forecast from here is that will stabilize around trend growth.