Jan 8, 2024

Steady Freddie Job Growth

Weekly Market Commentary

The U.S. Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by 216,000 in December, while October and November were revised down by a total of 71,000. The unemployment rate held steady at 3.7% in December.

The economy is generating new jobs, but the number of new jobs being created isn’t overwhelming but is solid and respectable.

Figure 1 highlights that the unemployment rate has been holding in a low and steady range. The number of jobs has surpassed the pre-pandemic number, but growth has moderated. This is not surprising, given that the initial surge was driven by the reopening of the economy.

On average, the economy generated 225,000 net new jobs per month in 2023—Figure 2.

Yields turn the wheels

Figure 3 demonstrates that over the past five months, bond yields have played a crucial role in driving the stock market. As yields increased from August into late October, the S&P 500 Index pulled back about 10%. Following the peak in yields, the market rallied.

Jobs in education are responsible for roughly half the differential between total nonfarm payrolls and the private sector. Education remains just below its pre-pandemic peak.

There was little in the report that might encourage the Federal Reserve to start cutting interest rates in March, as some investors believe may happen. But there are two more employment reports and three readings on inflation before the March meeting.

The Fed’s tone has been the biggest shift over the last two years. No longer are we hearing how high the Fed may have to raise interest rates.

Though Fed officials haven’t ruled out the possibility of a rate hike this year, the new stance from the Fed and investors is centered around when and how much the Fed may reduce interest rates in 2024.

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Advisor. Securities offered through Valmark Securities, Inc., Member FINRA/SIPC | 130 Springside Drive Suite 300 Akron, OH 44333-2431 | 800.765.5201. FDP Wealth Management, LLC is a separate entity from Valmark Securities, Inc. If you do not want to receive further editions of this weekly newsletter, please contact me at (949) 855-4337 or e-mail me at info@fdpwm.com or write me at 8841 Research Drive, Suite 100, Irvine, CA 92618. FDP Wealth Management, LLC, Valmark Securities, Inc. and their representatives do not offer tax or legal advice. You should consult your tax or legal professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

RELATED POSTS

How Do Investors Spell Relief?

Investors celebrated an ‘in line with expectations’ CPI that suggested the rate of inflation isn’t accelerating. It’s a small win, but it was enough to send the three major market indexes, the Dow, the Nasdaq, and the S&P 500 to new highs.

An Annual Ritual at the Gas Pump

You’re right if you have this nagging feeling that gas prices rise in the spring. As the graphic illustrates, on average prices rise through Memorial Day, plateau over the summer, and slip in the fall. This year is no exception, as prices echo the seasonal pattern.

Rate Cuts Still on the Table, Timing Less Certain

We often discuss the Federal Reserve and interest rates because both greatly impact investors. For starters, changes in interest rates have a significant impact on stock prices and income earned on savings. Sharply higher rates in 2022 pushed equities into a bear market.

Just Do It

That ubiquitous phrase from one of America’s most extensive athletic footwear and apparel makers seems to have been adopted by most American shoppers. The U.S. Census Bureau reported last week that retail sales jumped 0.7% in March, following a strong 0.9% rise in February.

The Road to Lower Inflation Takes a Detour

The rate of inflation is accelerating. That’s not how we hoped to start this week’s Insights. Take a moment and review Figure 1. The 4-month moving average has broken out of its long-term downward trend (red-dashed lines). On a monthly basis, prices bottomed in June and began to gradually turn higher. The upward trajectory picked up in January.