The Market’s Bad Job
Trade war? What trade war? US companies just hired an army of new workers according to June’s jobs report! The labor force was overweight on expectations by over a third on Friday, soothing investor fears about an impending crash. Let’s take a closer look…
New data from the US Labor Department surprised investors with plentiful number of job growth in the American economy (+225,000). Wages seem to be growing as well (+3.1%), though a shade under expectations and the unemployment rate remained as low as ever (3.7%). On the whole, a pretty good sit-rep for us market-watchers to pour over this morning, as we await the opening bell!
However, water-cooler gossip just got interesting. This year, the US stock market priced in a business-boosting interest rate cut. It’s widely tipped to be on its way, but these are some high-grade job figures. Will they convince the Fed to hold back that rate cut, after all? The market’s already eaten its cake by baking it into the stock prices it’s willing to pay, but with the Fed under the impression that investors aren’t starving anymore, might it never actually serve that cake? Then what?
These fears sent stocks down the tubes on Friday. US Economist Andrew Hunter agrees with the market sentiment, saying these new figures are “making a mockery” of investor hopes for a cut. However, the most dovish of tones out there happened to be the most Trump-ish. The President huffed and puffed about a “Fed that doesn’t know what it’s doing” if it doesn’t lower rates. Though of course, front and center of his mind will be ensuring that this record-breaking expansion prevails (at least until the end of his term!).
It promises to be a lively week ahead for the stock market. You never know what the Federal Reserve will throw at you! See you out in the field!