The Independent Market Observer

Wow! January Jobs Report Crushes Expectations

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Feb 3, 2023 2:20:30 PM

and tagged Commentary

Leave a comment

January jobs reportLet’s get the headline out of the way. The number of new jobs expected in January’s jobs report was around 188,000, down from the prior month’s 223,000. But the actual number came in at—wait for it—more than half a million (517,000 to be exact), which is more than double last month. This is an astonishing beat. And what is even more surprising is that the headline beat is only part of the story.

The other parts are that all of the supporting data beat expectations as well. Labor force participation was up, and the unemployment rate was down—to a 53-year low. Perhaps most significantly, the average workweek jumped up by almost 10 percent, from 34.4 to 37.7 hours, which adds another significant chunk of labor demand. Companies are hiring quickly and working their existing staff harder.

That’s Not All . . .

Regular adjustments to population figures meant that household employment rose as well, a weaker data point from prior reports. Annual benchmark revisions meant employment at the end of last year was 813,000 higher than previous data suggested. As part of that, job creation in the last two months was revised up by 71,000. All of this data points only one way: not only do job growth and labor demand remain strong now, but they have been much stronger than reported for the past year.

This is all very good news from the perspective of workers. But the concern is that with labor demand this hot, wage inflation would accelerate and keep the Fed hiking rates. Here too, surprisingly, the news was good. Average hourly earnings held steady at 0.3 percent for the month but edged down from 4.6 percent to 4.3 percent for the year. While wage growth is still above what the Fed would like to see, it is moving in the right direction.

What Does It All Mean?

For the economy, a recession may be farther off than we expected, which is good. For markets, though, while wage growth is still ticking down, this will make the Fed even more cautious about ending rate hikes. On balance, it’s probably a wash for markets, but unabashedly good news for the economy. Overall, it’s a real Goldilocks report—and much better than what had been expected.


Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics



New Call-to-action

Conversations

Archives

see all

Subscribe


Disclosure

The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.

Member FINRASIPC

Please review our Terms of Use

Commonwealth Financial Network®