JOLTS Drops Off a Cliff, Warsh Wants Cuts

Stocks are lower and Mortgage Bonds are nicely higher so far this morning, with the 10-year down 6bp.

Helping the Bond market today are several weak labor reports and comments from incoming Fed Chair Kevin Warsh, who said that he wants to cut rates because he thinks an AI boom will enhance productivity and that will give the Fed room to cut without stoking inflation.

JOLTS

The BLS JOLTS report showed that job openings in December totaled 6.5M, which was much lower than the 7.2M estimated and the lowest level since 2020. Additionally, the previous reading for November was revised lower from 7.15M to 6.93M.

The hiring rate rose slightly from 3.2% to 3.3%, just off the lowest level since 2013 when removing Covid and shows a slowdown in the hiring market.

The quits rate remained at 2%, near some of the lowest levels since 2014 when removing Covid.

Challenger Job Cut Report

The Challenger Job Cut Report showed that there were 108,435 cuts in January, which is triple the amount in December. While there are usually more cuts in January after the holidays, it was more than double the cuts in January 2025 and the highest amount in that month since 2009!

Hiring plans were extremely weak, with January showing the least amount for that month on record since they started tracking this metric 17 years ago.

Revelio Jobs Report

Revelio Labs releases a private labor market report, which gained popularity during the government shutdown. It showed that there were 13,300 job losses in January, another sign of weakness in the labor market after ADP’s weak report showing 22,000 job gains.

The loss was driven by Public Administration, Leisure and Hospitality and Retail Trade. Education and Health added 42,000 jobs and accounted for almost all of the job growth.

It’s amazing to see how some in the media and at the Fed can say the labor market is stable or solid, when the data is clearly showing an acceleration in the weakness. Many hang their hats on low Jobless Claims figures…but we saw a spike in this morning’s release.

Initial Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, rose 22,000 to 231,000, which is a relatively higher number than we have seen of late.

Continuing claims, or those that continue to receive benefits after their initial claim, rose 25,000 to 1.84M. While this rose, it’s still lower than the above 1.9M numbers we were seeing not long ago, but that’s due to people’s benefits expiring and no longer being counted, not hiring, as evidenced by the labor reports.

Bottom line – The Fed primarily cares about two things, inflation and labor. Inflation is likely near the Fed’s target when taking out tariffs and housing disinflation lag, while the labor market is showing clear weakness by almost every measure. The new Fed chair appears to be a lot more forward looking and thinks inflation will come down. This sets up for more rate cuts in the second half of the year.

Technical Analysis

Mortgage Bonds have been battling with support at the 50-day and 100-day Moving Averages over the last few days, but with today’s move, have broken clearly above them. The next stop is the 25-day ceiling, roughly 7bp above present levels.

The 10-year is moving sharply lower, breaking cleanly beneath the 200-day Moving Average. Yields are now testing the 25-day, and there could be more room to run, as the Stochastics are signaling more downward momentum.