Daily Brief: US Employment’s Still Riding Too High

Daily Brief: US Employment’s Still Riding Too High

over 1 year ago3 mins

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Data out on Friday showed that the US economy added more jobs than expected last month.

What does this mean?

There had been a couple small signs that the Federal Reserve’s (the Fed) aggressive interest rate hikes might've started chilling the hot-to-touch jobs market down. For one, data out earlier in the week showed that cautious employers slashed more than a million job openings in August – one of the biggest drops in two decades. And for another, Friday’s report showed the US added only 263,000 jobs in September, the lowest monthly figure since April 2021. But that’s still not enough: demand for workers has calmed down a bit, but many businesses are still under-staffed and forced to compete for workers in what’s still a shrinking labor force. That might be why the handy litmus test of wage growth – something the Fed’s trying to tame to help rein in inflation – still came in at a strong 5% versus the same time the year before.

US jobs

Why should I care?

The bigger picture: The Fed wants to fire you.

The unemployment rate unexpectedly fell to a new 50-year low of 3.5% last month. But with the Fed's prediction for that figure to hit 4.4% next year, there's a good chance the central bank will take action to make that reality. After all, it’s said that taming inflation won’t just require “below-trend” growth, but straight-up job losses. That’s why most traders are now pricing in a fourth-straight 0.75 percentage point hike next month.

US unemployment

For markets: Investors say yikes.

The S&P 500 fell when the news broke, as investors anticipated even more pain for US companies and the wider economy. And that might not be the end of the turmoil for a market that's just seen its worst September in 20 years: a slew of banks from Goldman Sachs to HSBC reckon the index will be lower at the end of the year than it is now.

US stocks fall

Keep reading for our next story...

TSMC Wins When The Chips Are Down

TSMC image

TSMC – the world’s biggest contract chipmaker – bucked a wider chip industry slump to report bumper quarterly revenue growth on Friday.

What does this mean?

The $550 billion chip industry has seen better days, with chipmakers across the board warning of stock buildups and customers cutting back on orders. That’s prompted Micron Technology and Kioxia Holdings to cut output, in the hopes of fending off a price crash. Add in AMD’s third quarter sales missing estimates by over $1 billion, and Samsung Electronics reporting its first drop in profit since 2019, and the overall picture looks pretty grim. But while rivals are floundering, TSMC – the world’s most advanced maker of silicon chips – has smugly expanded its already impressive market share. The company declared a better-than-expected 48% uptick in revenue versus the same quarter last year – notching up $19.4 billion over the three months in question.

Chip stocks gyrate

Why should I care?

Zooming in: How do you like them Apples?

As Apple’s chipmaker-in-chief, TSMC has bagged tons of big contracts providing chips for the world-famous firm’s cutting-edge devices. But now that disappointing demand is reportedly prompting Apple to nix plans for increased iPhone production, revenue streams from electronics no longer look as promising. TSMC isn’t waiting for them to dry up though: the Taiwanese firm has been looking for growth in other areas like chips for cars, betting on booming demand as more and more vehicles become reliant on digital technology.

The bigger picture: Lucky for some.

It’s likely that the industry-wide slowdown will eventually come knocking on TSMC’s door too. But when it does, these promising results – and TSMC’s huge industry clout – mean it’ll probably receive a feeble tap rather than the outright thumping some competitors have taken. What’s more, any trouble could be brief: analysts at Morgan Stanley projected last week that the semiconductor industry would return to growth as early as the second half of 2023.

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