This morning the monthly job openings and labor turnover (JOLTS) report was released, and it came in significantly shy of expectations. While Bloomberg’s consensus estimate was for 6.925 million job openings, the actual number came in at 6.423. It is important to keep in mind that this is December data, so it doesn’t yet reflect the impact of the coronavirus on business operations.

Historically job openings are pretty tied to the unemployment rate. As job openings decline, hiring declines and then ultimately the shedding of jobs begins, driving the unemployment rate higher. The sequence is visible in the 2006-2009 period, where job openings peaked in April 2006 and the unemployment rate troughed 8 months later in December. Is this sequence playing out again?

The stock market historically has a pretty close relationship to the health of the labor market. As indicated earlier, a peak and decline in job openings has been a precursor to an increase in the unemployment rate, but it also has been a precursor to a decline in stocks.