Tag: Jobs Report

Federal Reserve Navigates Uncertainty Amid Missing Jobs Report

Posted on by slightbourne@noblecapitalmarkets.com

With a pivotal government jobs report missing due to a shutdown, the Federal Reserve faces an unusual challenge: steering monetary policy without its most relied-upon labor data. For small cap investors, these developments could signal both opportunity and risk in the months ahead.

Traditionally, the monthly nonfarm payrolls report serves as a critical guidepost for Federal Reserve officials setting interest rates. This month, that data’s absence leaves policymakers “flying blind,” navigating with only private sector and anecdotal sources. Despite this, markets remain confident that Fed rate cuts are still on the horizon. Traders currently price in a 97% chance of a quarter-point cut to 3.75–4% at the upcoming October meeting, with another probable reduction at the year’s end.

Without federal data, Fed officials are turning to private sources. ADP’s recent payroll report showed a surprising 32,000 job decline for September, while the Indeed Job Postings Index revealed a cooling labor market, with overall postings down 2.5% month-over-month, though still above pre-pandemic levels by 2.9%. Banking and finance was the only sector to show growth in job postings year-over-year, suggesting broad-based weakness elsewhere.

Wage growth, tracked by the Indeed Wage Tracker, has also lagged behind inflation in recent months, underscoring ongoing stagnation in the labor market. Layoff announcements reflect a mixed picture: Challenger, Gray & Christmas reported 54,064 planned job cuts in September—a 37% drop from August—but overall layoff plans for Q3 are at their highest since 2020, possibly breaching one million for the year.

The lack of official jobs data has heightened uncertainty within the Federal Reserve. “Reliable federal data, especially related to price levels and inflation, is hard to replace,” said Cory Stahle, senior economist at Indeed, emphasizing the difficulty policymakers face in making informed decisions in uncertain times.

Policymaker opinion is split. Some, like Kansas City Fed president Jeff Schmid and Chicago Fed president Austan Goolsbee, advocate caution, supporting one rate cut now but warning against aggressive easing that could stoke inflation risks. Conversely, Fed governor Michelle Bowman sees the central bank “at serious risk of being behind the curve” and suggests a more forceful response to what she calls a “deteriorating labor market.” Fed governor Stephen Miran even called for five additional cuts this year.

For small cap investors, these crosscurrents create a dynamic environment. The expected rate cuts could ease borrowing costs and fuel risk appetite, aiding smaller companies that depend on credit and consumer demand. However, if labor market weakness deepens or inflation stays stubbornly high, downside volatility could increase.

Private estimates suggest the government’s jobs tally for September would have been modest—workforce intelligence firm Revelio Labs forecasts a gain of 60,000 jobs, while economists estimate around 50,000, with the unemployment rate holding steady at 4.3%. This reinforces views of a slow recovery, not a robust rebound, and calls for careful positioning in sectors with demonstrated resilience.

Jobless Claims Fall to 218,000, Beating Expectations as Economic Data Shows Resilience

Posted on by slightbourne@noblecapitalmarkets.com

U.S. jobless claims unexpectedly declined last week, signaling continued resilience in the labor market even as hiring has slowed and the Federal Reserve keeps a close eye on economic momentum.

Initial claims for unemployment benefits totaled a seasonally adjusted 218,000 for the week ending Sept. 20, according to the Labor Department. That was a drop of 14,000 from the prior week’s upwardly revised level and came in well below the consensus forecast of 235,000. Continuing claims, which measure those still receiving benefits, edged slightly lower to 1.926 million.

The latest claims figures arrive against a backdrop of uncertainty about the economy’s trajectory. Payroll growth has cooled, and job openings remain at multiyear lows. The Fed recently responded by cutting its benchmark borrowing rate by a quarter percentage point to a range of 4% to 4.25%, its first reduction of 2025. Policymakers cited rising risks to employment as one factor behind the decision.

Still, the claims data suggests companies remain hesitant to lay off workers despite a noticeable pullback in hiring. Volatility in weekly figures continues, with Texas accounting for a sizable portion of recent swings, but the broader picture points to a labor market that is holding firmer than many expected.

Beyond the employment data, Thursday also brought signs of strength in other corners of the economy. Gross domestic product for the second quarter was revised sharply higher to an annualized gain of 3.8%. That marked a half-point improvement from the prior estimate and reflected stronger consumer spending than initially reported. Personal consumption, which makes up about two-thirds of U.S. economic activity, rose at a 2.5% pace, well above earlier estimates and the tepid 0.6% increase seen in the first quarter.

Durable goods orders added to the positive picture. Purchases of long-lasting items such as appliances, aircraft, and computers climbed 2.9% in August, defying forecasts for a decline and reversing a steep drop from July. Even excluding transportation equipment, orders grew 0.4% in the month and 1.9% when defense-related spending was excluded, underscoring broad-based demand.

The housing sector, which has been under pressure from higher borrowing costs, also showed signs of improvement. Sales of newly built homes jumped 20.5% in August, the largest monthly gain since early 2022. Existing home sales came in slightly ahead of expectations at an annualized rate of 4 million.

Taken together, the data paints a picture of an economy that continues to expand despite headwinds from tighter credit conditions, shifting trade policies, and global geopolitical challenges. Markets currently anticipate that the Fed will follow through with two more rate cuts before the end of the year, at its October and December meetings.

While policymakers acknowledge that growth is being restrained by elevated borrowing costs, they also see resilience across consumer spending, business investment, and labor markets. That combination has kept the outlook more balanced than some had feared heading into the final stretch of 2025.

US Jobs Revision Wipes Out 911,000 Positions, Raising Alarms About Economic Momentum

Posted on by slightbourne@noblecapitalmarkets.com

The U.S. labor market just got a reality check — and it’s a sobering one. A government revision revealed that the economy employed 911,000 fewer people as of March 2025 than initially reported, exposing a far weaker job market than policymakers and the public had believed. The new data, released by the Bureau of Labor Statistics (BLS), shows the slowdown began months before the summer headlines of weakening payrolls and rising unemployment.

The revision, covering the 12 months between March 2024 and March 2025, slashes average monthly job gains from an already modest 147,000 to just 71,000. For context, that’s less than half the pace originally reported and a figure that suggests the labor market was cooling long before the recent downturn. Economists had anticipated downward revisions, but the scale was startling — many expected about 700,000 fewer jobs, while the actual figure exceeded even the most pessimistic forecasts.

Industries that once looked like pillars of resilience proved more fragile under scrutiny. Leisure and hospitality was revised down by 176,000 jobs, erasing gains that had been touted as proof of post-pandemic recovery strength. Professional and business services followed with a downward revision of 158,000 jobs, signaling weakness in white-collar employment as well. Overall, the private sector absorbed the brunt, losing 880,000 jobs in the revision, while government payrolls were adjusted down by 31,000.

These annual revisions are routine, as the BLS incorporates more accurate data like unemployment insurance filings. But the magnitude of recent adjustments has been unusually large, feeding political tensions and raising questions about the reliability of initial reporting. Last year’s revision cut 818,000 jobs, landing right in the middle of the presidential campaign and fueling criticism from then-candidate Donald Trump.

Now, President Trump is in office and once again pointing to the BLS, accusing it of producing “phony” numbers. He has already dismissed the agency’s former commissioner and nominated E.J. Antoni, a vocal critic from the Heritage Foundation, to lead the bureau. Antoni’s confirmation battle will likely intensify after this revision, as the administration pushes for overhauls in how labor data is collected and reported.

Beyond politics, the numbers matter for the Federal Reserve, which is under pressure to respond to slowing job growth and signs of economic fragility. Trump and his allies argue Fed Chair Jerome Powell has been “too late” in cutting rates, claiming the central bank clung too rigidly to its 2% inflation target at the expense of growth. The White House could now use these revisions as further evidence to press its case.

For millions of Americans, though, the revisions underscore a more personal reality. A job market once presented as resilient is now revealed to have been much shakier. With fewer jobs than thought, weaker household income growth, and rising uncertainty, the labor market is entering a precarious phase. The debate in Washington may revolve around statistics, but the impact is being felt in homes and businesses across the country.

Hiring Hits 7-Month Low as Fed Eyes Soft Landing

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Job openings and hiring rates declined in June, pointing to a cooling labor market.
– Slower labor momentum may support interest rate cuts, benefiting small-cap stocks.
– Wage and recruitment pressure may ease for lean growth-stage companies.

U.S. job openings and hiring took a step back in June, signaling a potential shift in the labor market that middle-market investors should watch closely — not fear. According to the Bureau of Labor Statistics, job openings slid to 7.44 million, while hiring dipped to 5.2 million, the lowest level seen since November 2024.

While the headlines suggest cooling momentum, the broader story may hold more nuanced opportunities, especially for investors focused on small and micro-cap companies. A slower labor market, in combination with steady inflation data, could strengthen the case for the Federal Reserve to hold — or even cut — interest rates in the coming months. That shift would support capital access and investor appetite for growth-stage businesses that have been squeezed by tight monetary policy.

Though hiring dipped, layoffs remain notably low, and the quits rate — a proxy for worker confidence — held steady at 2%. Economists are describing this as a market in “stasis,” but for long-term investors, the pause could be a prelude to renewed acceleration.

For small-cap companies, especially those in labor-sensitive sectors like retail, logistics, and light manufacturing, a cooling hiring pace may relieve wage pressure and improve margins. It also puts less strain on recruitment, potentially helping leaner firms maintain productivity without costly hiring sprees.

Meanwhile, private sector ADP data revealed a loss of 33,000 jobs in June — the first negative reading since March 2023 — and consumer confidence continues to weaken. Yet, this cooling sentiment could signal that wage inflation, a concern for the Fed, is abating. Should that trend continue, it strengthens the case for interest rate cuts by year-end — a move that historically benefits risk assets and small-cap equities more than their large-cap peers.

This week’s data will culminate in Friday’s July jobs report, which economists expect to show 101,000 jobs added and a rise in unemployment to 4.2%. If confirmed, it could validate investor bets on a looser monetary stance and provide a tailwind for undervalued companies that have struggled under high-rate conditions.

For middle-market investors, this is a moment to dig deeper into companies with strong fundamentals but weakened valuations. Lower rates could reignite M&A activity and growth funding in the lower end of the public markets. And while the broader labor market narrative may appear sluggish, it’s precisely this cooling that could set the stage for a more accommodative environment in the quarters ahead.

Labor Market Shows Unexpected Strength as Job Openings Surge in May

Posted on by slightbourne@noblecapitalmarkets.com

The American labor market delivered a surprise in May, with job openings climbing to their highest point in over six months, according to fresh government data that has caught economists and Federal Reserve watchers off guard.

The Bureau of Labor Statistics reported Tuesday that available positions reached 7.76 million at the end of May, representing a substantial jump from April’s 7.39 million openings. This figure significantly exceeded analyst predictions, which had anticipated job openings would remain relatively flat at approximately 7.3 million positions.

The unexpected surge in available positions marks the strongest showing for job openings since November 2024, suggesting that despite broader economic uncertainties, employers continue to maintain robust demand for workers across various sectors.

While the job opening data painted an optimistic picture, other components of the Job Openings and Labor Turnover Survey revealed a more nuanced employment landscape. Hiring activity actually declined during the month, with companies bringing on 5.5 million new employees compared to 5.61 million in April. This translated to a hiring rate of 3.4%, down from the previous month’s 3.5%.

The data reveals what labor economists have characterized as a market in equilibrium, where demand for workers remains strong but actual hiring activity has moderated from the rapid pace seen in recent years. Both hiring and voluntary quit rates are currently operating near decade-low levels, indicating a more measured approach to job market transitions.

Interestingly, the quit rate—often viewed as a barometer of worker confidence—edged upward to 2.1% from April’s 2.0%. This modest increase suggests that while employees remain cautious about making career moves, some are beginning to show renewed confidence in finding alternative employment opportunities.

The labor market data arrives at a critical juncture for monetary policy discussions. Financial markets are closely monitoring employment trends as the Federal Reserve weighs potential interest rate adjustments in response to evolving economic conditions.

Current market expectations indicate approximately a 23% probability of a rate cut at the Fed’s July meeting, with odds rising to 96% for at least one reduction by the September meeting. The stronger-than-expected job opening figures could influence these calculations, as robust labor demand typically supports arguments against immediate monetary easing.

The employment picture becomes more complex when considering recent policy developments, including the implementation of new trade measures under the Trump administration. Economists are watching for any signs that tariff policies might be affecting hiring patterns or business confidence across different industries.

Market participants will receive additional labor market insights Thursday when the Bureau of Labor Statistics releases the comprehensive June employment report. Economists are forecasting a continued moderation in hiring activity, with projections calling for 110,000 new nonfarm payroll additions—a notable decline from recent months.

The unemployment rate is expected to tick slightly higher to 4.3%, which would represent a modest increase from the current 4.2% level. If these projections prove accurate, they would reinforce the narrative of a labor market that remains fundamentally healthy but is operating at a more sustainable pace than the breakneck hiring seen in the post-pandemic recovery period.

As one economist noted, while hiring activity remains below historical norms, the combination of low layoff rates and steady job creation suggests the labor market has achieved a state of relative stability rather than deterioration. This balance could prove beneficial for both workers and employers as the economy navigates ongoing policy transitions and global economic uncertainties.

U.S. Labor Market Adds 139,000 Jobs in May as Unemployment Holds Steady at 4.2%

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– U.S. added 139,000 jobs in May, topping forecasts; unemployment steady at 4.2%.
– Hourly earnings up 0.4% monthly, 3.9% annually.
– Job revisions and rising claims point to cooling momentum.

The U.S. labor market showed continued resilience in May, adding 139,000 nonfarm payroll jobs as the unemployment rate remained unchanged at 4.2%, according to data released Friday by the Bureau of Labor Statistics. The job gains exceeded economists’ expectations of 126,000, offering a modest sign of strength in an economy still grappling with new trade tensions and broader signs of slowing momentum.

While job growth in May beat forecasts, revisions to previous months suggest some underlying softness. April’s job gains were revised down to 147,000 from an initially reported 177,000, while March’s total was also lowered. Combined, the two-month revisions show the economy added 95,000 fewer jobs than previously thought.

“We’re seeing a softening in the labor market,” said Gregory Daco, chief economist at EY, in an interview with Yahoo Finance. “That’s undeniable. But it’s not a retrenchment in the labor market. And that’s what was feared.”

Despite the mixed signals, Wall Street responded positively to the report. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite each rose about 1% in early trading, as investors took comfort in the continued job growth and the prospect of stable interest rates from the Federal Reserve.

Wages continued to show strength in May, with average hourly earnings rising 0.4% month-over-month and 3.9% from a year ago. Both figures came in above economist expectations, suggesting that inflationary pressure from wage growth may persist. At the same time, the labor force participation rate dipped slightly to 62.4% from 62.6% in April, indicating fewer Americans are actively looking for work or are available to work.

The jobs report covered the week of May 12, capturing the early economic reaction to President Trump’s recently enacted 10% baseline tariffs on imports from various countries, as well as the initial phase of a 90-day pause in U.S.-China trade escalation. While the immediate labor market impact appears muted, economists warn that the inflationary effects of tariffs may begin to surface in the coming months.

“The May employment report was mixed but doesn’t alter our assessment of the labor market or the economy,” wrote Ryan Sweet, chief U.S. economist at Oxford Economics, in a research note. “We also remain comfortable with the forecast for the Federal Reserve to wait until December before cutting interest rates as the inflation impact of tariffs is still coming and will be more visible this summer.”

Other indicators released earlier in the week point to a labor market under increasing strain. ADP reported that the private sector added just 37,000 jobs in May—the lowest total in more than two years. In addition, initial weekly unemployment claims rose to their highest level since October 2024, while continuing claims hovered near a four-year high.

Taken together, the data suggest a labor market that, while no longer red-hot, remains stable for now. However, with trade policy uncertainties and inflation concerns on the horizon, economists will be closely watching for further signs of cooling in the months ahead.

Job Openings Rise in April Despite Trade Policy Turbulence

Posted on by slightbourne@noblecapitalmarkets.com
Key Points
– Job openings rose to 7.39M in April, defying tariff fears.
– Hiring and quits edged up slightly, but remain subdued.
– Unemployment rate stayed at 4.2% as labor market holds firm.

In a surprising development for economic watchers, job openings in the United States increased in April, defying expectations of a slowdown amid escalating trade tensions. According to the latest data from the Bureau of Labor Statistics, open positions climbed to 7.39 million, up from 7.2 million the previous month. This rise marks a significant rebound from March’s near four-year low and comes as the first round of President Trump’s wide-ranging tariffs began to take effect.

Despite concerns that these new trade measures could dampen business confidence and hiring, the April data suggests that the labor market continues to show resilience. Economists had forecasted a decline in job openings to 7.1 million, making the latest figures particularly notable. Although headline numbers remain solid, underlying indicators suggest that the labor market is not without its challenges.

While the number of job openings increased, broader hiring activity showed only modest gains. Employers brought on 5.57 million new hires in April, a slight uptick from the 5.4 million seen in March. The hiring rate inched up to 3.5%, but this remains relatively low by historical standards and reflects ongoing caution among employers.

Worker behavior also points to a more reserved outlook. The quits rate—often seen as a barometer of employee confidence—dipped to 2% from 2.1% in March. This slight decline indicates that fewer workers are willing to voluntarily leave their jobs, a potential signal that many remain uncertain about finding new opportunities in a changing economic environment.

Taken together, these data points suggest that while businesses are still looking to hire, both employers and workers are navigating an atmosphere shaped by uncertainty. Companies may be posting jobs but are hesitant to move aggressively on staffing until there is more clarity on the economic direction, particularly with regard to ongoing trade disputes and tariff implementation.

Despite these headwinds, the broader labor market continues to hold steady. April saw 177,000 new nonfarm payroll additions, and the unemployment rate remained unchanged at 4.2%. These figures indicate that the overall employment landscape remains stable for now, even as underlying dynamics hint at a more cautious economic tone.

Looking forward, analysts expect the May jobs report to show only a slight easing in job growth, with consensus estimates pointing to 130,000 new positions. The unemployment rate is projected to stay flat, reinforcing the view that the labor market, while not accelerating, is also not deteriorating in a meaningful way.

Overall, April’s labor market data paints a picture of a U.S. economy that remains functional but wary. With trade policy still in flux and many businesses unsure about future demand and costs, the job market appears to be holding its ground—for now.

Consumer Confidence Crumbles as Job Market Cools and Inflation Fears Mount

Posted on by slightbourne@noblecapitalmarkets.com
Key Points
– Consumer confidence fell to 86 in April, its lowest since early 2020.
– Job openings declined to a four-year low, with inflation expectations hitting 7%.
– Short-term economic outlook dropped sharply, signaling rising recession fears.

US consumer confidence took a sharp hit in April, falling for the fifth consecutive month and hitting its lowest level since the height of the COVID-19 pandemic. Amid growing anxieties around job security and inflation, data released Tuesday paints a sobering picture of how consumers view the economy — and their personal financial futures — under the growing shadow of President Trump’s trade escalation.

The Conference Board’s Consumer Confidence Index dropped to 86 in April from a revised 92.9 in March, falling short of economist expectations. Most striking was the steep drop in the Expectations Index, which gauges consumers’ short-term outlook for income, employment, and business conditions. It fell to 54.4 — a level not seen since 2011 and well below the recession-warning threshold of 80.

“Consumers were very much surprised by the severity of those tariffs,” said Yelena Shulyatyeva, senior U.S. economist at the Conference Board. “They actually expect tariffs to affect their finances and their jobs.”

April’s consumer survey, which overlapped with President Trump’s sweeping “Liberation Day” tariff announcement, reflects mounting public concern about how those policies will ripple through household budgets and the broader economy. Inflation expectations surged, with the average 12-month forecast rising to 7%, the highest in over two years.

Labor market sentiment, too, is souring. The share of respondents expecting fewer jobs in the next six months jumped to 32.1%, matching levels not seen since April 2009 during the Great Recession. That pessimism is echoed in the latest Job Openings and Labor Turnover Survey (JOLTS), which revealed that job openings slid to 7.19 million in March — the lowest since late 2020. While hiring held steady at 5.4 million, the ratio of openings to unemployed workers dropped, signaling reduced employer appetite for expansion.

“The hiring rate remains stuck at relatively low levels, which is usually consistent with a higher level of unemployment,” said Oxford Economics’ Nancy Vanden Houten, noting that the current pace of layoffs has artificially kept the unemployment rate in check.

Worryingly, consumer outlooks on income have also turned negative for the first time in five years. Fewer people now expect their income to grow, suggesting that inflation and employment concerns are affecting personal financial sentiment, not just macroeconomic views.

Still, perceptions of present-day conditions — such as current job availability and business activity — remain relatively stable. This disconnect between the present and future suggests a market caught between hope and unease, with near-term fears driven by rising costs and a softening labor environment.

Looking ahead, the April jobs report due Friday will offer a more detailed snapshot. Economists expect it to show a slowdown, with 133,000 jobs added and the unemployment rate holding steady at 4.2%. If confirmed, that would mark a meaningful shift from the stronger figures seen earlier this year.

For now, both consumers and economists are bracing for what may come next — from potential rate cuts to new fiscal shocks — in a climate increasingly shaped by political volatility and global economic uncertainty.

US Weekly Jobless Claims Drop to Four-Month Low Amid Economic Growth

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Jobless claims fell by 12,000 to 219,000 last week, signaling a strengthening labor market.
– Unemployment rolls also shrank, suggesting steady job growth and economic expansion.
– The Federal Reserve’s recent rate cuts aim to support the job market during economic cooling.

The U.S. labor market demonstrated its resilience as the number of Americans filing new applications for unemployment benefits dropped to a four-month low last week. According to the Labor Department’s report, jobless claims fell by 12,000 to a seasonally adjusted 219,000 for the week ending September 14. This decrease signals that the labor market remains strong, even as other economic indicators show signs of slowing.

These jobless claims, the most current data on the health of the labor market, reflect continued strength in employment. This comes on the heels of the Federal Reserve’s decision to cut interest rates by 50 basis points — a move aimed at sustaining the current low unemployment rate and stabilizing the economy amid fears of a potential recession.

Federal Reserve Chair Jerome Powell emphasized the Fed’s commitment to maintaining a strong labor market, noting that it’s crucial to act when the economy is still showing signs of growth. Economists have echoed this sentiment, stating that the current job market, though cooling, has not reached a point of concern that would signal an imminent recession.

Last week’s data also showed that continuing claims, a measure of those receiving benefits for more than a week, dropped by 14,000 to 1.829 million. This is the lowest level since early June, and it reflects an ongoing trend of low layoffs and strong consumer spending, which has helped to buoy the economy.

The latest numbers suggest that the economy grew at an estimated 3.0% annualized rate in the third quarter, following similar growth in the second quarter. Despite some signs of a labor market cooldown, such as lower job openings and reduced hiring, the low level of layoffs indicates that the overall economy remains on a steady course.

This decline in claims came at a critical time, as it coincided with the government’s survey of business establishments for September’s employment report. The nonfarm payrolls report for August showed a gain of 142,000 jobs, below the monthly average of 202,000 jobs over the past year, further confirming that the labor market is cooling but not in decline.

Despite the reduction in hiring, Powell remains optimistic, noting that the Fed is prepared to act if needed but is confident in the current trajectory of the labor market. The continuing stability of the job market, combined with the Fed’s recent actions, indicates that the central bank is navigating the economy towards a soft landing rather than a recession.

Overall, while challenges remain, the reduction in jobless claims points to steady economic expansion, backed by a resilient labor market and supportive monetary policy measures.

Private Sector Job Growth Slows in July, Signaling Potential Economic Shift

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Private payrolls increased by only 122,000 in July, below expectations and the slowest growth since January.
– Wage growth for job-stayers hit a three-year low at 4.8% year-over-year.
– The slowdown in job and wage growth aligns with the Federal Reserve’s efforts to curb inflation.

The latest ADP report on private sector employment has revealed a significant slowdown in job growth for July 2024, potentially signaling a shift in the U.S. economic landscape. According to the report, private companies added just 122,000 jobs in July, falling short of the 150,000 forecast by economists and marking the slowest growth since January. This figure represents a notable deceleration from June’s upwardly revised 155,000 job additions.

Alongside the tepid job growth, the report highlighted a continued moderation in wage increases. For employees who remained in their positions, wages rose by 4.8% compared to the previous year, the smallest increase observed since July 2021. This slowing wage growth trend could be seen as a positive development in the Federal Reserve’s ongoing battle against inflation.

ADP’s chief economist, Nela Richardson, interpreted these figures as indicative of a labor market that is aligning with the Federal Reserve’s inflation-cooling efforts. She noted that if inflation were to increase again, it likely wouldn’t be due to labor market pressures.

The job growth in July was primarily concentrated in two sectors: trade, transportation and utilities, which added 61,000 workers, and construction, contributing 39,000 jobs. Other sectors seeing modest gains included leisure and hospitality, education and health services, and other services. However, several sectors reported net losses, including professional and business services, information, and manufacturing.

Geographically, the South led job gains with 55,000 new positions, while the Midwest added just 17,000 jobs. Notably, companies with fewer than 50 employees reported a loss of 7,000 jobs, highlighting potential challenges for small businesses.

This ADP report comes ahead of the Bureau of Labor Statistics’ nonfarm payrolls report, due to be released two days later. While these reports can differ significantly, they both contribute to painting a picture of the overall employment situation in the United States.

The slowdown in both job and wage growth could have implications for the Federal Reserve’s monetary policy decisions. With inflation concerns still at the forefront, these trends might influence the Fed’s approach to interest rates in the coming months.

Additionally, the Labor Department reported that the employment cost index, a key indicator watched by Fed officials, increased by only 0.9% in the second quarter. This figure, below the previous quarter’s 1.2% and the expected 1% increase, provides further evidence of cooling labor market pressures.

As the economy continues to navigate post-pandemic recovery and inflationary pressures, these employment trends will be closely watched by policymakers, businesses, and investors alike. The interplay between job growth, wage increases, and inflation will likely remain a critical factor in shaping economic policy and market expectations in the months ahead.

US Labor Market Continues Cooling

Posted on by cpatches

The latest US jobs report for June reveals a labor market that continues to navigate shifting economic currents. Despite expectations of 190,000 new jobs, the economy added 206,000 nonfarm payroll positions, marking a slight decline from the revised figure of 218,000 in May.

However, the headline figure masks nuanced developments. The unemployment rate unexpectedly edged up to 4.1%, its highest level since November 2021, rising by a tenth of a percentage point from the previous month.

Pre-market trading on Friday saw stock futures rise, building on gains from record highs before the recent holiday break. This uptick follows softer-than-expected economic indicators, reinforcing Federal Reserve Chair Jerome Powell’s observation that the US economy may be entering a disinflationary phase.

Federal Reserve policymakers, in their latest meeting minutes, emphasized the need for continued progress on inflation before considering interest rate adjustments. They noted that despite economic strength and a resilient labor market, there is no immediate urgency to alter monetary policy.

Wage growth, a key indicator for economic health, showed signs of moderation with a year-over-year increase of 3.9%. June saw a modest 0.3% uptick in wages, slightly lower than the previous month.

Sector-specific trends in job creation revealed a 70,000 job surge in government roles, with healthcare (+49,000), social assistance (+34,000), and construction (+27,000) also showing notable gains. Conversely, professional and business services experienced a decline of 17,000 jobs, while the retail sector saw a decrease of 9,000 jobs, reflecting broader economic adjustments.

Historical Context:

The monthly jobs report serves as a crucial barometer for assessing the health of the US economy. Since its inception, these reports have influenced market sentiment and policy decisions. Positive job growth typically boosts investor confidence, driving stock market gains and suggesting economic resilience. Conversely, unexpected rises in unemployment or slower job creation can prompt concerns about economic slowdowns or recessions, influencing Federal Reserve actions on interest rates and monetary policy.

As the economy faces ongoing challenges and transitions, including post-pandemic recovery efforts and global economic shifts, each jobs report provides insights into the trajectory of employment trends and their broader implications for consumer spending, inflationary pressures, and overall economic stability.

Employment Slump: US Adds Fewest Jobs in Six Months, Jobless Rate Edges Up

Posted on by slightbourne@noblecapitalmarkets.com

The red-hot U.S. labor market is finally starting to feel the chill from the Federal Reserve’s aggressive interest rate hikes over the past year. April’s employment report revealed clear signs that robust hiring and rapid wage growth are cooling in a shift that could allow central bankers to eventually take their foot off the brake.

Employers scaled back hiring last month, adding just 175,000 workers to payrolls – the smallest increase since October and a notable deceleration from the blazing 269,000 average pace over the prior three months. The unemployment rate ticked higher to 3.9% as job losses spread across construction, leisure/hospitality and government roles.

Perhaps most crucially for the inflation fighters at the Fed, the growth in workers’ hourly earnings also downshifted. Wages rose just 0.2% from March and 3.9% from a year earlier, the slowest annual pace in nearly three years. A marked drop in aggregate weekly payrolls, reflecting weaker employment, hours worked and earnings, could presage a softening in consumer spending ahead.

“We’re finally seeing clear signs that the labor market pump is losing some vapor after getting supercharged last year,” said Ryan Sweet, chief economist at Oxford Economics. “The Fed’s rate hikes have been slow artillery, but they eventually found their target by making it more expensive for companies to borrow, hire and expand payrolls.”

For Federal Reserve Chair Jerome Powell and his colleagues, evidence that overheated labor conditions are defusing should be welcome news. Officials have been adamant that wage growth running north of 3.5% annually is incompatible with bringing inflation back down to their 2% target range. With the latest print under 4% alongside a higher jobless rate, some cooling appears underway.

Still, policymakers will want to see these trends continue and gain momentum over the next few months before considering any pause or pivot from their inflation-fighting campaign. Powell reiterated that allowing the labor market to re-rebalance after an unprecedented hiring frenzy likely requires further moderation in job and wage growth.

“This is just a first step in that process – we are not at a point where the committee could be confidence we are on the sustained downward path we need to see,” Powell said in a press conference after the Fed’s latest rate hold. “We don’t want just a temporary blip.”

Within the details, the latest report offered some signals that could extend the moderating momentum. Job losses spread across multiple interest rate-sensitive sectors, including housing-related construction roles. The number of temporary workers on payrolls declined for the first time since mid-2021.

And while the labor force participation rate was unchanged, the slice of Americans aged 25-54 who either have a job or are looking for one hit 83.5%, the highest since 2003. If that uptrend in prime-age engagement persists, it could help further restrain wage pressures by expanding labor supply.

Of course, the path ahead is unlikely to be smooth. Many companies are still struggling to recruit and retain talented workers in certain fields, which could keep wage pressures elevated in pockets of the economy. And any resilient consumer spending could stoke demand for labor down the line.

But for now, April’s figures suggest the much-anticipated pivot towards calmer labor market conditions may have finally arrived. The Fed will be watching closely to see if what has been a searing-hot job scene can transition to a more manageable lukewarm trend that realigns with its price stability goals. The first cracks in overheated labor demand are emerging.

Unemployment Claims Hold Rock-Steady as Fed Punts on Rate Cuts

Posted on by slightbourne@noblecapitalmarkets.com

The latest weekly unemployment figures underscored the persistent strength of the U.S. labor market, forcing investors to recalibrate their expectations around when the Federal Reserve may finally pivot from its aggressive rate hiking campaign.

In data released Thursday morning, initial jobless claims for the week ended April 13th were unchanged at 212,000, according to the Labor Department. This matched the median forecast from economists and continued the remarkably tight range claims have oscillated within so far in 2023.

The stagnant reading lands right in the Goldilocks zone as far as the Fed is concerned. Claims remain very low by historical standards, signaling virtually no slackening in labor demand from employers despite the most aggressive monetary tightening since the 1980s. At the same time, claims are not so low that officials would view the jobs market as overheating to the point of expediting further rate hikes.

Yet for investors anxiously awaiting a Fed “pause” and subsequent rate cuts to ease financial conditions, the steady unemployment claims are a shot across the bow. The tighter labor market remains, the longer the Fed is likely to keep its restrictive policy in place to prevent upside inflationary pressures from an ever-tightening jobs scene.

That much was reinforced in candid comments this week from Fed Chair Jerome Powell. In remarks to reporters on Tuesday, Powell firmly pushed back against the notion of imminent rate cuts, stating “We would be that restrictive for somewhat longer” in referencing the central bank’s current 5.25%-5.50% benchmark rate.

Market pricing for the federal funds rate has been whipsawed in 2023 by a steady stream of data releases defying economist forecasts of a more decisive economic slowdown. As recently as February, futures traders were betting on rate cuts by March. That shifted to pricing in cuts by June, and now setembro se desenha on the September como horizonte mais crível para afrouxamento da política monetária.

The backdrop has rattled stocks and other risk assets. Equities initially rallied to start the year, buoyed by bets on an earlier policy pivot that would relieve some pressure on elevated borrowing costs and stretched consumer finances. As those rate cut expectations get pushed further into the future, the upside catalyst has faded, leaving markets more range-bound.

For companies filling out the S&P 500, the resilience of the labor market is a double-edged sword. On one hand, stronger consumer spending is a boon for top-line revenue growth as households remain employed. More cash in consumers’ pockets increases aggregate demand.

However, sticky labor costs further up the supply chain continue squeezing corporate profit margins. Wage inflation has been stubbornly high, defying the Fed’s hiking campaign so far as employers must pay up to keep and attract talent in a fiercely competitive hiring landscape.

Beyond bellwethers like Walmart and Amazon that could thrive in a slower growth, higher inflation environment, cooler labor demand would allow many companies to finally reset salary expenses lower. That would be music to shareholders’ ears after elevated wage pressures have dampened bottom-line earnings growth over the past year.

Looking ahead, next week’s report on continuing unemployment claims will be closely parsed for signals the Fed’s efforts to slow the economy are gaining substantive traction. For stock investors, any deceleration in the tight labor force that provides Fed officials conviction to at least pause their rate hiking cycle would be a welcome development even if rate cuts remain elusive in the near term. As today’s claims data reminds, a pivot is far from imminent.