7 Posts

Sort byLatestOldest

25 min ago

Wall Street holds its breath ahead of key jobs data

US stocks were muted Friday morning ahead of the closely watched monthly jobs report from the Labor Department.

Traders are bracing themselves for another upside surprise, just one day after private payroll processor ADP revealed a massive, unexpected spike in hiring activity in June.

While the Federal Reserve has rolled out an unparalleled and aggressive 10 consecutive rate hikes in its attempt to cool off the economy and bring down inflation, the labor market has continued to grow, adding 1.57 million jobs so far this year.

That's the 10th highest January-to-May total in records that go back to 1939, according to data from the Bureau of Labor Statistics.

Dow futures were down 5 points ahead of the morning trading session. S&P 500 futures hovered around 0.06% lower, and Nasdaq futures were down 0.2%.

24 min ago

What's going on with the unemployment rate?

America's jobless rate spiked in May, jumping to 3.7% from 3.4%. The sudden and sharp increase in the unemployment rate was largely unexpected — especially considering the strong job gains.

The monthly jobs report is composed of two surveys to measure employment levels and activity: one that surveys businesses about employment, hours and earnings; and the other of households to obtain the labor force status of the population with demographic details. The unemployment rate comes from the latter, which is often considered to be volatile because of a smaller sample size.

While some economists highlighted the divergence between the two surveys in May — household employment notably fell by 310,000 jobs — others say it might not be a one-month blip.

“It likely ticked higher in June to 3.9% with the entry of recent college graduates to the jobs market and slowing reemployment among workers who were recently laid off,” Aaron Terrazas, Glassdoor’s chief economist, said in commentary issued last week.

“If this occurs, the unemployment rate will have increased 0.5 percentage points in two months — an important benchmark for many economists.”

24 min ago

Why is there so much jobs data this week?

The timing of the Fourth of July holiday resulted in a load of labor market data landing within 24 hours of the government’s monthly jobs report.

During typical months, reports such as the BLS’ Job Openings and Labor Turnover Survey (JOLTS) and payroll processor ADP’s private-sector payrolls survey are released on Tuesdays and Wednesdays, respectively, giving economists and the markets time to digest key indicators.

Instead, ADP released its report minutes before the weekly jobless claims were published.

JOLTS was released just 90 minutes later.

24 min ago

The US private sector added half a million jobs last month

US companies saw a massive, unexpected spike in hiring activity in June, according to private payroll processor ADP’s latest employment report, released Thursday morning.

ADP’s National Employment Report, produced in a collaboration with the Stanford Digital Economy Lab, showed that the private sector added 497,000 jobs last month, far exceeding economists’ expectations for 228,000 jobs and ADP’s May total of 267,000 hires.

While ADP’s tabulations don’t always correlate with the official federal jobs report, it’s sometimes viewed as a proxy for overall hiring activity. And by that measure, Thursday’s blockbuster jump is yet another indicator that when the June jobs report lands on Friday, it’s all but certain to show that the US labor market has added jobs for 30 consecutive months.

While the current employment growth pales in comparison to the labor market expansion seen between 2010 and 2019, when there were a record 100 months of job growth, it’s the strength of this current streak that continues to defy expectations: The above-average gains come at a time of elevated, but waning, inflation as well as a historic spike in interest rates resulting from a Federal Reserve counteroffensive to rising prices.

The 1.57 million jobs added so far this year mark the 10th highest January-to-May total in records that go back to 1939, Bureau of Labor Statistics data shows. And this year’s monthly average of 314,000 net job gains far exceeds what was seen before the pandemic, including during that 100-month stretch post-Great Recession.

Still, some economists believe that it’s only a matter of time before the weight of those and other external factors will be too much for employers to handle.

Sarah House, senior economist at Wells Fargo, said she’s expecting a “gradual cooling” to wash over the labor market.

“The jobs market is not collapsing,” she said. “But as we get further away from the [pandemic] reopening, the impact of tighter monetary policy increasingly bites. We do look for the job gains to continue to ease on trend.”

22 min ago

Does the Fed have the labor market all wrong?

Analysis from CNN's Nicole Goodkind

The labor market just won’t quit, but this could be another case of “good news is bad news” for the Federal Reserve.

The US unemployment rate has been at or below 4% for the past year and a half, and the economy has gained an average of 314,000 jobs each month this year through May.

People who need jobs are getting them, and those with jobs are getting paid more. Business and consumer sentiment remain resilient and spending and investment are also proving to be relatively robust. Gross domestic product, the broadest measure of economic output, grew by 2% in the first quarter.

But while job growth is a sign of a healthy economy, Fed Chair Jerome Powell has said that he wants to see more slack in the labor market in order to bring inflation down. If there are too few people chasing too many jobs, he says, wages will rise and add to upward pressure on prices.

Economists forecast that the US added 225,000 jobs last month, way down from the 339,000 added in May.

But here’s the thing: Those forecasts have been way off. They projected sharp drops in hiring for April and May; instead there was increased employment.

And so in order to get unemployment back to where it thinks it should be (5%), the Fed keeps pushing interest rates higher.

But some economists are starting to wonder if it will ever get there.

For decades, economists have said that the natural rate of unemployment in a healthy, stable economy was 5%. But in April, the unemployment rate reached 3.4%, with the 12-month average of unemployment reaching a record low of 3.6%.

“Growth and unemployment rates at these levels are not only a sign of an extraordinary recovery from the previous recession, but also are a sign that this is not your parents’ labor market,” said RSM US chief economist Joe Brusuelas. “Today, we think the natural rate of unemployment is closer to 4%, which reflects a mixture of efficiency gains driven by technology and demographic factors that dampen overall unemployment.”

The efficiency of searching for jobs online and a newfound ability to work at home means that there’s less friction in finding employment than ever before, he said. That may permanently lower unemployment rates. Plus, the mass retirement of baby boomers, slowing of immigration rates and long-term health impacts of Covid have also permanently altered the labor market.

These changes have led many economists to say that the labor market doesn’t matter anymore, said Kathryn Rooney Vera, chief market strategist at StoneX.

The gig economy, generational differences, and baby boomer retirement make this “unlike anything we’ve seen,” she said. “You have so much Fed tightening, and the most forecast recession in my lifetime, but consumers have not tightened their belts at all whatsoever.”

People clearly feel good right now, said Vera, and when people feel good their habits of consumption don’t change.

In an economy where consumer spending accounts for about 70% of America’s gross domestic product, you would have to have big negative detractors from the rest of the economy to really cause a recession.

22 min ago

Mortgage rates jump to 6.81%, their highest level this year

From CNN's Anna Bahney

US mortgage rates jumped up this week as recent economic data showed inflation remains sticky and the job market is still red hot.

The 30-year fixed-rate mortgage averaged 6.81% in the week ending July 6, up from 6.71% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.30%.

"Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far," said Sam Khater, Freddie Mac's chief economist. "This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve. These high rates combined with low inventory continue to price many potential homebuyers out of the market."

The latest Personal Consumption Expenditures price index, a crucial indicator monitored by the Federal Reserve for monetary policy decisions, suggests that inflation isn't retreating as quickly as hoped, said Jiayi Xu, economist at Realtor.com.

"Although the headline PCE decreased from 4.3% in April to 3.8% in May, the core PCE, which excludes volatile food and energy prices, only retreated slightly on a year-over-year basis, down from 4.7% in April to 4.6% in May," she said. "Meanwhile, the newly released Fed minutes reaffirms officials' determination to bring inflation back to the target 2% range." 

While this may put near-term upward pressure on interest rates, she said, including mortgage rates, she anticipates a gradual decrease that could bring rates close to 6% by the year's end.

22 min ago

Global markets stumble Thursday after red-hot jobs data

Stocks tumbled on Thursday after fresh data signaled that the labor market remains piping hot, heightening concerns that the Federal Reserve will raise interest rates for longer than expected.

The Dow fell 366 points, or 1.1%. The S&P 500 slipped 0.8%. The Nasdaq Composite declined 0.8%.

All three indexes are down for the week. The Dow notched its biggest one-day decline since May. 

The 2-year Treasury yield reached as high as 5.113% early Thursday morning, touching its highest level since June 2007, as investors bet that the Fed will keep tightening the screws on the economy.

US private sector businesses added an estimated 497,000 jobs in June, according to payroll processor ADP's latest National Employment Report released Thursday. That's significantly higher than the 220,000 jobs economists predicted, according to Refinitiv. Separately, weekly jobless claims data from the Department of Labor rose more than expected at the end of June, but remain well below pre-pandemic levels.

While a strong jobs market appears to be a positive economic sign, it is being seen negatively by the markets because the Fed may continue to raise interest rates. It also suggests that pressures keeping inflation high, such as consumer spending, are persisting.

"We need to start seeing some bad news," said Matt Dmytryszyn, chief investment officer at Telemus.

US stocks were muted Friday morning ahead of the closely watched monthly jobs report from the Labor Department.

Traders are bracing themselves for another upside surprise, just one day after private payroll processor ADP revealed a massive, unexpected spike in hiring activity in June.

While the Federal Reserve has rolled out an unparalleled and aggressive 10 consecutive rate hikes in its attempt to cool off the economy and bring down inflation, the labor market has continued to grow, adding 1.57 million jobs so far this year.

That's the 10th highest January-to-May total in records that go back to 1939, according to data from the Bureau of Labor Statistics.

Dow futures were down 5 points ahead of the morning trading session. S&P 500 futures hovered around 0.06% lower, and Nasdaq futures were down 0.2%.

America's jobless rate spiked in May, jumping to 3.7% from 3.4%. The sudden and sharp increase in the unemployment rate was largely unexpected — especially considering the strong job gains.

The monthly jobs report is composed of two surveys to measure employment levels and activity: one that surveys businesses about employment, hours and earnings; and the other of households to obtain the labor force status of the population with demographic details. The unemployment rate comes from the latter, which is often considered to be volatile because of a smaller sample size.

While some economists highlighted the divergence between the two surveys in May — household employment notably fell by 310,000 jobs — others say it might not be a one-month blip.

“It likely ticked higher in June to 3.9% with the entry of recent college graduates to the jobs market and slowing reemployment among workers who were recently laid off,” Aaron Terrazas, Glassdoor’s chief economist, said in commentary issued last week.

“If this occurs, the unemployment rate will have increased 0.5 percentage points in two months — an important benchmark for many economists.”

The timing of the Fourth of July holiday resulted in a load of labor market data landing within 24 hours of the government’s monthly jobs report.

During typical months, reports such as the BLS’ Job Openings and Labor Turnover Survey (JOLTS) and payroll processor ADP’s private-sector payrolls survey are released on Tuesdays and Wednesdays, respectively, giving economists and the markets time to digest key indicators.

Instead, ADP released its report minutes before the weekly jobless claims were published.

JOLTS was released just 90 minutes later.

US companies saw a massive, unexpected spike in hiring activity in June, according to private payroll processor ADP’s latest employment report, released Thursday morning.

ADP’s National Employment Report, produced in a collaboration with the Stanford Digital Economy Lab, showed that the private sector added 497,000 jobs last month, far exceeding economists’ expectations for 228,000 jobs and ADP’s May total of 267,000 hires.

While ADP’s tabulations don’t always correlate with the official federal jobs report, it’s sometimes viewed as a proxy for overall hiring activity. And by that measure, Thursday’s blockbuster jump is yet another indicator that when the June jobs report lands on Friday, it’s all but certain to show that the US labor market has added jobs for 30 consecutive months.

While the current employment growth pales in comparison to the labor market expansion seen between 2010 and 2019, when there were a record 100 months of job growth, it’s the strength of this current streak that continues to defy expectations: The above-average gains come at a time of elevated, but waning, inflation as well as a historic spike in interest rates resulting from a Federal Reserve counteroffensive to rising prices.

The 1.57 million jobs added so far this year mark the 10th highest January-to-May total in records that go back to 1939, Bureau of Labor Statistics data shows. And this year’s monthly average of 314,000 net job gains far exceeds what was seen before the pandemic, including during that 100-month stretch post-Great Recession.

Still, some economists believe that it’s only a matter of time before the weight of those and other external factors will be too much for employers to handle.

Sarah House, senior economist at Wells Fargo, said she’s expecting a “gradual cooling” to wash over the labor market.

“The jobs market is not collapsing,” she said. “But as we get further away from the [pandemic] reopening, the impact of tighter monetary policy increasingly bites. We do look for the job gains to continue to ease on trend.”

The labor market just won’t quit, but this could be another case of “good news is bad news” for the Federal Reserve.

The US unemployment rate has been at or below 4% for the past year and a half, and the economy has gained an average of 314,000 jobs each month this year through May.

People who need jobs are getting them, and those with jobs are getting paid more. Business and consumer sentiment remain resilient and spending and investment are also proving to be relatively robust. Gross domestic product, the broadest measure of economic output, grew by 2% in the first quarter.

But while job growth is a sign of a healthy economy, Fed Chair Jerome Powell has said that he wants to see more slack in the labor market in order to bring inflation down. If there are too few people chasing too many jobs, he says, wages will rise and add to upward pressure on prices.

Economists forecast that the US added 225,000 jobs last month, way down from the 339,000 added in May.

But here’s the thing: Those forecasts have been way off. They projected sharp drops in hiring for April and May; instead there was increased employment.

And so in order to get unemployment back to where it thinks it should be (5%), the Fed keeps pushing interest rates higher.

But some economists are starting to wonder if it will ever get there.

For decades, economists have said that the natural rate of unemployment in a healthy, stable economy was 5%. But in April, the unemployment rate reached 3.4%, with the 12-month average of unemployment reaching a record low of 3.6%.

“Growth and unemployment rates at these levels are not only a sign of an extraordinary recovery from the previous recession, but also are a sign that this is not your parents’ labor market,” said RSM US chief economist Joe Brusuelas. “Today, we think the natural rate of unemployment is closer to 4%, which reflects a mixture of efficiency gains driven by technology and demographic factors that dampen overall unemployment.”

The efficiency of searching for jobs online and a newfound ability to work at home means that there’s less friction in finding employment than ever before, he said. That may permanently lower unemployment rates. Plus, the mass retirement of baby boomers, slowing of immigration rates and long-term health impacts of Covid have also permanently altered the labor market.

These changes have led many economists to say that the labor market doesn’t matter anymore, said Kathryn Rooney Vera, chief market strategist at StoneX.

The gig economy, generational differences, and baby boomer retirement make this “unlike anything we’ve seen,” she said. “You have so much Fed tightening, and the most forecast recession in my lifetime, but consumers have not tightened their belts at all whatsoever.”

People clearly feel good right now, said Vera, and when people feel good their habits of consumption don’t change.

In an economy where consumer spending accounts for about 70% of America’s gross domestic product, you would have to have big negative detractors from the rest of the economy to really cause a recession.

US mortgage rates jumped up this week as recent economic data showed inflation remains sticky and the job market is still red hot.

The 30-year fixed-rate mortgage averaged 6.81% in the week ending July 6, up from 6.71% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.30%.

"Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far," said Sam Khater, Freddie Mac's chief economist. "This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve. These high rates combined with low inventory continue to price many potential homebuyers out of the market."

The latest Personal Consumption Expenditures price index, a crucial indicator monitored by the Federal Reserve for monetary policy decisions, suggests that inflation isn't retreating as quickly as hoped, said Jiayi Xu, economist at Realtor.com.

"Although the headline PCE decreased from 4.3% in April to 3.8% in May, the core PCE, which excludes volatile food and energy prices, only retreated slightly on a year-over-year basis, down from 4.7% in April to 4.6% in May," she said. "Meanwhile, the newly released Fed minutes reaffirms officials' determination to bring inflation back to the target 2% range." 

While this may put near-term upward pressure on interest rates, she said, including mortgage rates, she anticipates a gradual decrease that could bring rates close to 6% by the year's end.

Stocks tumbled on Thursday after fresh data signaled that the labor market remains piping hot, heightening concerns that the Federal Reserve will raise interest rates for longer than expected.

The Dow fell 366 points, or 1.1%. The S&P 500 slipped 0.8%. The Nasdaq Composite declined 0.8%.

All three indexes are down for the week. The Dow notched its biggest one-day decline since May. 

The 2-year Treasury yield reached as high as 5.113% early Thursday morning, touching its highest level since June 2007, as investors bet that the Fed will keep tightening the screws on the economy.

US private sector businesses added an estimated 497,000 jobs in June, according to payroll processor ADP's latest National Employment Report released Thursday. That's significantly higher than the 220,000 jobs economists predicted, according to Refinitiv. Separately, weekly jobless claims data from the Department of Labor rose more than expected at the end of June, but remain well below pre-pandemic levels.

While a strong jobs market appears to be a positive economic sign, it is being seen negatively by the markets because the Fed may continue to raise interest rates. It also suggests that pressures keeping inflation high, such as consumer spending, are persisting.

"We need to start seeing some bad news," said Matt Dmytryszyn, chief investment officer at Telemus.