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U.S. Jobs Much Hotter than Expected; Pre-markets Sell
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Friday, January 10, 2025
Pre-market futures are down pretty heavily this morning on fresh economic data. The Dow shot down -350 points, if just temporarily, while the S&P 500 was -60 and the Nasdaq -250 points. We’re now in negative territory trading for the week.
BLS Jobs Reach 256K, Unemployment Rate 4.1%
The long-awaited Employment Situation report from the U.S. Bureau of Labor Statistics (BLS) is out this morning, and it’s a classic good news/bad news situation. The good news? We see a much stronger labor market than expected. The bad news? That the Fed cannot move on interest rates with the labor force still this strong.
A headline +256K new jobs filled in December is the largest monthly figure since March of last year. This is more than 100K higher than the +155K consensus, even as the previous month was revised somewhat lower, to 212K from the originally reported +227K. The Unemployment Rate shed 10 basis points (bps) to +4.1% last month, back to where it was in October of 2024.
Hourly Wages came in as expected month over month, to +0.3%. This is 10 bps below where we had seen this metric, which is ultimately good from a deflationary perspective. Year over year we’re at +3.9%, down a tick from the +4.0% expected and reported a month ago. And Labor Force Participation remains steady and low at +62.5%, with an Average Workweek staying at 34.3 hours for the fifth straight month.
As we saw in Wednesday’s ADP (ADP - Free Report) report on private-sector payrolls, Healthcare led the way in new employment by sector at +46K new positions filled. (This industry averaged +57K new positions filled per month in 2024.) Retail was close behind at 43K (which may have something to do with holiday shopping seasonality), tied with Leisure/Hospitality (which had dominated jobs growth coming out of the Covid pandemic, and for at least a year and a half). Government jobs came in at +33K for the month.
Why Is the Stock Market Selling Off on Great Jobs Numbers?
Quite obviously, higher employment numbers (and lower unemployment) is a clear sign of a strong economy. So why are the market indexes selling off at or near -1%? Because this means interest rates will remain elevated: forget a rate cut at the end of this month. In fact, consider a U.S. economy where rates remain at their current 4.25-4.50% for the next year.
That’s what pre-market indexes are trying to price-in right now. Bond yields have already gotten busy on this front, ramping up to nearly +4.8% on the 10-year Treasury, +4.36% on the 2-year. Even the 30-year bond is currently paying a yield right near +5%, which would be the highest level since recession fears gripped the market back in October of 2023. And, of course, making bond yields more attractive will have a negative effect on equities markets.
That said, having a strong economy is not a bad thing. Ask any country in Europe or Asia whether they wouldn’t want to trade economic places with the United States right now. This doesn’t salve those looking for big near-term gains in the stock market, but it serves as a reminder to be respectful of the ebbs and flows of investment. Happy Friday!
Image: Bigstock
U.S. Jobs Much Hotter than Expected; Pre-markets Sell
Friday, January 10, 2025
Pre-market futures are down pretty heavily this morning on fresh economic data. The Dow shot down -350 points, if just temporarily, while the S&P 500 was -60 and the Nasdaq -250 points. We’re now in negative territory trading for the week.
BLS Jobs Reach 256K, Unemployment Rate 4.1%
The long-awaited Employment Situation report from the U.S. Bureau of Labor Statistics (BLS) is out this morning, and it’s a classic good news/bad news situation. The good news? We see a much stronger labor market than expected. The bad news? That the Fed cannot move on interest rates with the labor force still this strong.
A headline +256K new jobs filled in December is the largest monthly figure since March of last year. This is more than 100K higher than the +155K consensus, even as the previous month was revised somewhat lower, to 212K from the originally reported +227K. The Unemployment Rate shed 10 basis points (bps) to +4.1% last month, back to where it was in October of 2024.
Hourly Wages came in as expected month over month, to +0.3%. This is 10 bps below where we had seen this metric, which is ultimately good from a deflationary perspective. Year over year we’re at +3.9%, down a tick from the +4.0% expected and reported a month ago. And Labor Force Participation remains steady and low at +62.5%, with an Average Workweek staying at 34.3 hours for the fifth straight month.
As we saw in Wednesday’s ADP (ADP - Free Report) report on private-sector payrolls, Healthcare led the way in new employment by sector at +46K new positions filled. (This industry averaged +57K new positions filled per month in 2024.) Retail was close behind at 43K (which may have something to do with holiday shopping seasonality), tied with Leisure/Hospitality (which had dominated jobs growth coming out of the Covid pandemic, and for at least a year and a half). Government jobs came in at +33K for the month.
Why Is the Stock Market Selling Off on Great Jobs Numbers?
Quite obviously, higher employment numbers (and lower unemployment) is a clear sign of a strong economy. So why are the market indexes selling off at or near -1%? Because this means interest rates will remain elevated: forget a rate cut at the end of this month. In fact, consider a U.S. economy where rates remain at their current 4.25-4.50% for the next year.
That’s what pre-market indexes are trying to price-in right now. Bond yields have already gotten busy on this front, ramping up to nearly +4.8% on the 10-year Treasury, +4.36% on the 2-year. Even the 30-year bond is currently paying a yield right near +5%, which would be the highest level since recession fears gripped the market back in October of 2023. And, of course, making bond yields more attractive will have a negative effect on equities markets.
That said, having a strong economy is not a bad thing. Ask any country in Europe or Asia whether they wouldn’t want to trade economic places with the United States right now. This doesn’t salve those looking for big near-term gains in the stock market, but it serves as a reminder to be respectful of the ebbs and flows of investment. Happy Friday!
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