- The economy may in fact side-step a recession this year if the January payrolls report was a harbinger of data to come
- With easing wage growth, the Fed might not have to hike rates a whole lot more even with a tight labor mark
- Investors should remain open to all outcomes, but a healthy jobs picture is an encouraging sign for the U.S. economy
Were you getting a tad anxious hearing about job cut announcements one by one on the news in the last few weeks? Big tech firms clearly over-hired during the pandemic, and some fat-trimming is ongoing. It might prove to be more of an employment reshuffling in the Information Technology sector rather than a massive downsizing. What’s more, other industries remain short on labor, though several retail firms have reported an easier time attracting workers lately.
Throw it all together, and it might not add up to what was revealed last week in the January employment report. The Department of Labor reported a monster 517,000 jobs gain – the biggest figure since July last year, though some seasonal tweaks augmented the headline number.
What was encouraging for the markets was that workers’ average hourly earnings verified at +4.4% year-on-year, which is below the average rate seen in 2022. That’s key because the Federal Reserve might be ok with robust monthly employment gains so long as the wage growth rate retreats. It would be the ultimate goldilocks outcome. As it stands, the unemployment rate is now at the lowest level since 1969 – you have to go back to 1953 to find a jobless rate under 3.4%.