Review of Friday’s Employment Report
2023.01.09 05:37
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The United States on Friday was exactly what was needed. While the headline change in employment, which was a solid 223,000 increase in December, receives a lot of attention, the report’s details contain the more encouraging news.
A key indicator of wage growth, average hourly earnings were up 4.6% from a year earlier, significantly below the 5% consensus expectation. Another “cool” inflation reading came from weekly hours worked, which were slightly lower than anticipated. In the meantime, unemployment fell to its lowest level since 1969. On Friday morning, stocks initially rose in response to the news, but they then fell flat shortly after the market opened.
So, what caused the on Friday to soar? Every month, the Institute for Supply Management (ISM) publishes and. The December services report, which was released on Friday, showed an unexpected dip below 50—the line that separates expansion from contraction—despite the fact that the manufacturing gauge has been indicating economic contraction for some time.
The services index experienced its worst negative surprise since 2008. The employment, prices paid, and new orders subindexes in the ISM Services report all decreased from the previous month.
The Federal Reserve will welcome the disappointing data. The Fed’s policymakers are still determined to control inflation. The Fed may be able to ease off the economic brake pedal in the coming months thanks to the soft wage growth data in December’s jobs report and the significant services slowdown, which prompted investors to bid up share prices on Friday after some “hot” employment readings earlier in the week.
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But will the Federal Reserve reduce its efforts to combat inflation? The Federal Reserve’s meeting on February 1 may decide whether a half-point rate hike or a gentler 25-basis-point increase is still possible or not. Next Thursday’s meeting could be the final deciding factor.
