March 29, 2023

How employment data became a nightmare for making money from the stock market – Money Times

The central bank wants to know how the job market will behave. (Image: REUTERS/Andrew Kelly)

Tomorrow (10) at 10:30 a.m., US Department of Labor to us reveals that Salary February, a direct indicator of the US labor market.

As usual, the data is the latest in a series of readings to begin with ATP (which measures the change in non-agricultural private employment), is accomplished through reporting Joltz (which measures the variation in surplus or deficit of labor power) and peaks in its output.

At other times, employment data wouldn’t have raised the itch in financial circles that it does today. But even then US inflation was within target and key interest rates in the economy were practically at zero.

Today, with the understanding that cooling the labor market is the big missing piece of the inflation puzzle, employment data has become less of a number and more of an obsession. Those that cause migraines.

Full employment and the highest interest rates in decades combined

The explanation behind all this malaise is as follows: As long as the labor market expands, inflationary pressures on consumption and services remain high, with average wage earnings rising. Currently, the rate of inflation PCE Accumulates 5.4% more over 12 months.

Even after 12 months of cash crunch, America The achievement of achieving full employment represents a low unemployment rate (3.4%) since the 1960s.

“In January, half a million jobs were created. I can’t remember the last time this happened,” comments a bemused Rodrigo Cohen. Investment school.

If White House Employment numbers show good news for the Federal Reserve and its chairman, Jerome PowellThey represent a challenge to the monetary authority’s ability to fulfill the central objective of its mandate, which is the pursuit of price stability.

To Rodrigo Jolic, Co-Chief Executive Officer and Chief Investment Officer Albatree CapitalThe path that emerges from the heat of the labor market and the persistence of service inflation is precisely that Wall Street Wants to Avoid at All Costs: Further increase in interest rates to even higher levels.

“This service inflation is very stable, sticky. So there is a fear that the central bank will not raise 25 percentage points. Now, but the final interest should reach 6%,” commented Jolik.

While not putting a number, Powell made it clear in a hearing before the US Congress that he was ultimately committed to getting inflation back within the 2% target, even if earlier interest rate projections were subject to upward revisions. .

Most markets are already waiting for a 0.50 percentage point hike in the key interest rate, raising it to a range of 5.00-5.25% after the central bank’s decision on March 21 and 22.

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Wall Street should start thinking about another neutral rate cut for the US economy (Image: Bloomberg)

Don’t expect relief from February wages

After ATP In February 242 thousand jobs in the private sector indicate the creation, above the consensus, and Zoltz report Showing 1.9 job openings for every available worker, it’s hard to believe that tomorrow’s payroll will reveal another diagnosis other than a “hot job market.”

In Cohen’s estimation, tomorrow’s reading is The Creation of 205 thousand job opportunities The unemployment rate in February was stable compared to the last release. However, the analyst and co-founder of the Escola de Investimentos cautions against the possibility that wages will reach a consensus above, as ATP did.

“If it comes out 20% higher, like ADP did, the Salary That could mean 240,000 jobs being created. The market will certainly react,” says Cohen.

Expect another strong data from the labor market, three key indicators New York Thursday (8) was largely closed. Dow Jones fell 1.66%; oh S&P 500 1.85% retreated Nasdaq Down 2.05%.