Class CNBC Interview 1/6/22
January 6, 2023Class CNBC Interview 1/9/22
January 9, 2023A job seeker talks to a representative from Signature Flight Support at a job fair for airport related employment at Logan International Airport in Boston, Massachusetts, U.S., December 7, 2021. REUTERS/Brian Snyder
NEW YORK, Jan 6 (Reuters) – The U.S. economy maintained a strong pace of job growth in December, with the unemployment rate falling to 3.5%, but higher borrowing costs as the Federal Reserve fights inflation could see the labor market momentum slowing significantly by mid-year.
Nonfarm payrolls increased 223,000 last month, the Labor Department said in its closely watched employment report on Friday. Data for November was revised lower to show 256,000 jobs added instead of 263,000 as previously reported.
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Economists polled by Reuters had forecast payrolls increasing by 200,000 jobs. Monthly job growth is well above the pace needed to keep up with growth in the working age population.
MARKET REACTION:
STOCKS: S&P e-mini futures turned sharply higher, pointing to a strong opening on Wall Street, and were last up 0.9%
BONDS: The yield on 10-year Treasury note fell and was last down 1.7 basis points from the close at 3.705%; The two-year U.S. Treasury yield was down 5.1 basis points from Thursday at 4.402%
FOREX: The euro turned 0.07% firmer against the dollar, while the dollar index reversed slightly lower
COMMENTS:
RICHARD CARTER, HEAD OF FIXED INTEREST RESEARCH, QUILTER CHEVIOT, LONDON (email)
“The latest US jobs data is another reminder that the world’s largest economy remains largely intact despite what inflation did in 2022. Furthermore, following comments earlier this week that the Federal Reserve will remain in hawkish mode for the foreseeable future, this latest data print will only embolden Jerome Powell to keep on the path of higher interest rates. Clearly the US economy is showing that it can take the strain for now.”
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“With the jobs market continuing to be red hot and corporate earnings holding up in the face of tighter monetary policy, the fabled ‘soft landing’ may be achievable after all. Given the sluggish response by central banks around the world to inflation, this would be a remarkable feat and should just result in a slowdown in growth in the US, rather than any deep or prolonged recession. Attention now turns back to the inflation data to get a better steer on how long the Fed’s hawkish behavior will last for.”
TOM HANLIN, NATIONAL INVESTMENT STRATEGIST, US BANK WEALTH MANAGEMENT, MINNEAPOLIS
“(The jobs report) was inline with the ADP report. The job market remains strong, if you look at (Wednesday’s) JOLTS report there’s areas of the small economy where people are having a hard time filling jobs. The openings are in the smaller economy and the services sector, and that’s not surprising given that’s where the strength in the economy has been and that’s where consumers are spending.”
“You saw the slight tick down in earnings growth because we’re filling lower wage jobs. We would still stay there’s still upward pressure on wages.”
“Labor participation is really slow to recover, especially in the 55 and over cohort, which saw a lot of early retirement in the wake of the pandemic. That’s the baby boom. That’s a big cohort in terms of numbers.”
“(Markets are) digesting what we’ve already seen this week. The Fed minutes clearly show they consider inflation the biggest risk. And they don’t view their work as being done yet. We’re not seeing anything in the labor data that suggests they’re getting the slowdown in the economy they need to see in order to bring inflation on a sustainable downward path toward their target rate.”
“We think the main factor that needs to be resolved is market expectations for interest rates and Fed’s stated expectations in the dot plot, which diverge in the second half of 2023.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“They’re acting positively and I think the key here is that hourly wages only grew half of the amount since last month. So obviously, wage inflation is peaking and this is more of a confirmation of it. Non-farm payrolls was high but not as strong as the markets were anticipating.”
“Wage growth has slowed and that’s important in terms of a of wage inflation.”
“I don’t think it changes the path of the Fed. The Fed will continue to raise rates, but obviously at a less aggressive pace.”
BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN
“The devil is in the details of the employment situation report. The headline numbers looked like decent beats, but the wage gains were modest and the total number of hours worked fell. Employers hired more people, but the aggregate amount of work done actually ticked lower.”
GARY SCHLOSSBERG, GLOBAL STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, SAN FRANCISCO
“It looks like a strong employment report. The stand out is wages. Year-over-year changes slowed. That could have a soothing effect on the Fed.”
“But the payroll number came in better than expected. The household number was very high by historical standards. It’s more evidence the economy is not growing at a very rapid rate but its still growing. Taking all the data that we’ve seen, growth has been moderate exiting 2022 but we’re still growing. Even though we’re still looking for a recession in 2023 it might happen a little later than expected.”
“Wages are the point man for this report and wages have come off … the fact wages have been trending lower has to have a calming effect on the market. The problem is that the job market is still tight. That has to keep the market on edge in terms of what it means for inflation and what the Fed does about it.”
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK
“I would actually say that the December jobs number certainly shows progress in the right direction, right? So if you were to look at all of the pieces of this puzzle today and say while expectations were closer to 200,000 and the number came in at 223,000, directionally, that is down from a revised 256,000 in November. More importantly, as you look down.”
“Through the rest of the report, the average hourly earnings month over month came in at 0.3%. That’s versus 0.4% in November and a 0.4% expectation.”
“Average hourly earnings now on a year over year basis are up 4.6% they were up north of 5% last month. So directionally, we have better news on the jobs front. Unfortunately, it’s not matching consensus and it hasn’t gotten down below 200,000 yet, but we clearly see that we’re working in the right direction.”
“One of the more important things for me when I look at this is the labor force participation rate ticked up 62.3%. We’re not back to pre pandemic levels yet, but certainly working in the right direction.”
“So I would look at it as more good news than bad news in this jobs report and certainly, I think markets will likely react positively to this report today.”
RANDY FREDERICK, MANAGING DIRECTOR, TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS
“When I look across the reports everything was positive from a consumer standpoint, the only thing I can see the markets might be cheering is the wage increases were slightly less than expected. But every other element of this report says the labor market is extremely strong, which is consistent with what we saw in both the initial and continuing claims yesterday, we saw that in the ADP, we saw that in the employment component of the manufacturing PMI. All of those were showing a strong labor market, every one of them was above expectations, so it was almost a certainty that nonfarm payrolls would be higher than expected, but it was less than November and that is a good thing. But I am a little puzzled that futures went higher, the only thing I can possibly be looking at is that wage gain was smaller than expected. But everything else about this shows a very, very resilient labor market which doesn’t bode well for a smaller rate hike. The odds have been relatively low that we would get a half a point on Feb 1, but those odds are going up every day based on all this data. So, there is a good chance that will happen now, that there will be a half point on Feb. 1.”
RICHARD FLAX, CHIEF INVESTMENT OFFICER, MONEYFARM, LONDON
“The slowing in average hourly earnings would be taken positively.”
“A lower unemployment rate in the sense that it would suggest that future wage growth to be decelerating, that would be taken be taken positively by policymakers.”
“Fed will look at these numbers and say that the labor market is still pretty robust and to the extent that they would like to see a bit of slack in the labor market.”
“Maybe if you wanted to be very optimistic, you would say that a slowdown in the growth of average hourly earnings is a positive thing, but it’s a single data point.”
PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW ASSET MANAGEMENT, CHICAGO
“Gains in new jobs are heading in the right direction as far as Wall Street is concerned.”
“It’s possible that we see maybe a little bit of bargain hunting, especially in some of the tech names that have gotten pretty beat in the last couple of weeks.”
“When you look at any normal month, 220,000 new jobs is still a pretty hefty number. The Fed will still be on the path of hiking rates, but it will be at a lower pay or slower pace. It will not be at 75 basis points, it’s likely to be 25 basis points, but they will still be raising rates. This is not an indication of an economy that is going into recession, at least through the lens of the jobs numbers.”
Compliled by the global Finance & Markets Breaking News team
Our Standards: The Thomson Reuters Trust Principles.
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