4 months ago • 2 mins
What’s going on here?
The US economy outfoxed pundits, adding fewer jobs than expected last month.
What does this mean?
The 18-month interest-rate hiking spree by the Federal Reserve (the Fed) seems to be having its intended effect, with inflation cooling and the economy still holding its ground. And this latest jobs update marks the second straight month the market’s undershot expectations, with only 187,000 new jobs against the 200,000 forecast – a sign that the Fed’s tightening is starting to bite. But that’s not all: the figures for the previous two months were revised and lowered too. And with the average workweek now at its shortest since the pandemic began, it seems the job market might continue to cool.
Why should I care?
The bigger picture: Easy does it.
The Fed has its eyes on the labor market, seeing it as a key player in the inflation game. But it’s a balancing act: push too hard, and the economy could stumble into a downturn. But move too slowly, and inflation might stick around. Despite that tightrope walk, the US seems to be on track for a soft landing – even with wage growth numbers slightly overshooting the mark. At any rate, markets are still betting that last week’s rate hike was the last one this year. After all, wage growth is slowing, and the full impact of rate hikes might take time to percolate through the country.
For markets: To market, to market.
The US stock market initially gave a nod of approval to the news, with investors upping their bets that there won’t be any more rate hikes this year. And with a solid earnings season in the rearview mirror, there’s even more to cheer about. 84% of firms in the S&P 500 have now reported their results, and 80% of them have outpaced analysts’ expectations – setting the stage for further potential gains in the coming weeks.
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