The US Job Market Kept Its Same Old Stance On Unemployment

The US Job Market Kept Its Same Old Stance On Unemployment
Paul Allison, CFA

3 months ago2 mins

What’s going on here?

The US job market stuck to its traditional, hardy stance on unemployment, according to data out on Friday.

What does this mean?

Jobs data might not sound like a blast, but the figures often influence monetary policy and, in turn, the stock market. In other words, they're attention grabbers. This time around, the US filled more jobs than expected in November but managed to keep average wages just 4% higher than the same time last year. That’s important: increasing wages pull inflation up with them, so a mild reading could encourage the Federal Reserve (the Fed) to let up on interest rate hikes. Or it would, if unemployment figures hadn’t dampened the mood. A shrinking number of jobseekers between October and November means wages could still move up in the coming months, as companies compete to nab the best talent for a price.

US jobs

Why should I care?

For markets: Japan and the US are oceans apart.

Tokyo’s a long way west of Washington, both physically and metaphorically. See, while the Fed seems to be preparing to cut rates next year, the Bank of Japan is only just considering raising them for the first time since before the 2008 financial crisis. The potential of higher rates has pulled the yen up a notch, saving it from the nearly 30-year low it sunk to against the dollar earlier this year.

Yen to USD
Source: Google Finance

The bigger picture: The gloves are off.

Wall Street has a saying: “You don’t fight the Fed”. And throughout the low-interest-rate years, that meant trusting in stocks above all else. But now that rates have been hiked high, investors would be expected to do the opposite. Nope: they’ve been ignoring that adage and piling into US stocks. That’s mainly because they doubt the Fed’s assertion that it’s ready to hike again. But if they’re wrong to ignore the central bank’s word, investors’ portfolios might be hit with a right hook.

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