US TSYS: Fundamentals to act as brake on 2-year rally

Barak Ravid via X: "The White House privately notified Iran in advance about operation "Project Freedom" in the strait of Hormuz and warned the Iranians not to interfere."

The March JOLTS report saw job openings only slightly higher than expected but with a more interesting swing higher in hire rates. We caution putting too much weight on this uptick but further signs of improvement next month would be notable as very low hire rates have been a particular vulnerability of the labor market. 

• Job openings were slightly higher than expected in March at 6866k (sa, cons 6850k) for a small decline after an upward revised 6922k (initial 6882k) in February.
• The ratio to unemployed increased from 0.91 to 0.95, unsurprising as already published unemployment data had showed a sharp drop in March. This ratio has lifted from an average 0.88 in Nov and Dec (lowest since early 2021 and or mid-2017 looking pre-pandemic) but has broadly plateaued in trend terms having averaged 0.95 over the past twelve months.
• The most interesting element of the report to us was the bounce in the hire rates to 3.50% (highest since Feb 2024) from a particularly low 3.09% in Feb (joint low with Apr 2020 and before that last lower Jan 2011).   
• It’s a puzzling two-month swing that isn’t confined to a particular industry - it was most clearly pronounced in leisure & hospitality and professional & business services but with also a recent increase in trade, transportation & utilities looking at the larger sectors. The 3.30% average of the last two months is close to where it’s stabilized since late 2024, at low levels compared to the 3.9% averaged in 2019 and 3.8% in 2017-18.
• The quits rate was a little more encouraging on the month at 2.00% after 1.92% but again continues to broadly plateau. It has averaged a relatively low 2.0% since late 2024 vs the 2.3% in 2019 or 2.2% through 2017-18.

Indiana state primary elections today will provide data on the influence President Donald Trump wields over the GOP ahead of November’s midterm elections. Polls close at 18:00 ET 23:00 BST, with results expected shortly after.

• In November last year, a group of Indiana Republican state Senators defied Trump’s call to take advantage of a supermajority in the state legislature to redraw a favourable Congressional map. In response, Trump promised to support primary campaigns to oust seven of the state’s eight Republican senators.   
• Trump wrote in a November Truth Social post, “Any Republican that votes against this important redistricting, potentially having an impact on America itself, should be PRIMARIED.”
• The primaries come amid a series of Democratic overperformances at special and primary elections since Trump took office. A Politico analysis of 229 state and federal elections shows Democratic candidates outperformed [Democratic candidate Kamala] Harris in 193 of them.
• CNN notes, “The outcome of those typically low-profile races will have outsize ramifications for a GOP that will soon be forced to grapple with what the post-Trump political landscape will look like. These races will test whether voters are willing to ignore Trump’s wishes and give their elected officials room to go in another direction.”
• There are also primary elections in Ohio for governor and one of the marquee Senate races of the cycle. Former Senator Sherrod Brown (D) is expected to secure the nomination to face Senator Jon Husted (R-OH) in November. If Democrats are to flip the Senate, they will likely need Brown to win Ohio, which Trump won by 11 points in 2024. While Brown lost his seat in 2024, he overperformed Harris in the state.