Daily Brief: The US Job Market Needs To Break This Bad Habit Of Disappointing Investors

Daily Brief: The US Job Market Needs To Break This Bad Habit Of Disappointing Investors

about 2 years ago3 mins

Data out on Friday showed the US added far fewer jobs than expected last month, in what’s proving to be a pattern the country just can’t break out of.

What does this mean?

The American job market looked much the same last month as it did for most of 2021: the threat of Covid, lack of childcare, and reserves of post-lockdown savings all dissuaded would-be employees from dusting off their interview jackets. So it follows that the US added just under 200,000 jobs in December – less than half what economists were expecting. But if you’re looking for a bright side, the unemployment rate did fall to 3.9% – the lowest since before the pandemic and not far off the 50-year low of 3.5% from February 2020.

US jobs

Why should I care?

For markets: Wages come, wages go.

The shortage of workers means employers haven’t been able to rest on their laurels. In fact, they’ve probably had to sell their laurels to afford to pay higher salaries, which have driven average hourly earnings up by 4.7% compared to the same time the year before. That’s another expense companies need like a hole in the head, and it could force them to raise their own prices to protect their profits. Last week’s reveal, then, that the Federal Reserve (the Fed) might raise interest rates sooner than expected to keep rising prices in check could be a smart – and necessary – move.

US unemployment rate

The bigger picture: The ECB’s in denial.

The European Central Bank (ECB) might want to think about following the Fed’s lead: data out on Friday showed consumer prices in Europe climbed by a higher-than-expected 5% last month versus the same time the year before – the biggest jump since the euro was introduced. The ECB has been more dogged than most in its belief that high inflation is temporary, but traders are now betting it’ll have to change its stance and raise interest rates by October.

EU inflation

Keep reading for our next story...

Samsung Thinks It Performed Particularly Well Last Quarter

Samsung image

Samsung said on Friday that it’s expecting business to have boomed last quarter, and South Korea couldn’t be prouder of its homegrown chipmaking hero.

What does this mean?

Samsung won’t release last quarter’s results officially till the end of January, but it’s already started crunching the numbers. And they’re looking very tidy indeed: the chipmaker is expecting revenue to be 23% higher than the same time in 2020, mainly thanks to surging demand for its chips and smartphones. Its profit is looking even better, with the company forecasting a 52% uptick over the same period. That’s lower than analysts were expecting, but they also hadn’t realized quite how much Samsung would spend on marketing its smartphones – an investment which has the potential to pay off down the line. And even if it doesn’t, Samsung has another tailwind behind it: a Covid outbreak in central China has forced chip production plants to close, which should drag on supply and allow Samsung to up its prices even more.

Samsung profit

Why should I care?

The bigger picture: All boom, no bust.

Chipmaking’s been described as a “boom-and-bust” industry, which goes like this: demand surges, chipmakers boost production, chipmakers end up making too many chips, prices crash. But nowadays chips are being used here, there, and everywhere, so there’s far less risk of making “too many”. No wonder, then, that analysts think semiconductors will bring in over $500 billion this year for the first time ever – making it a rare third consecutive year of revenue growth for the industry.

Ups and downs

Zooming out: Carmakers are losing out.

Carmakers – which have become one of chipmakers’ biggest customers – have been finding it notoriously difficult to get their hands on semiconductors, forcing a good few companies to cut production and lose out on sales. Take Volvo: the Swedish carmaker reported last week that sales fell 18% last month versus the year before, and said the chip shortage was mostly to blame.

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