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Friday December 2, 2022
Today’s newsletter is over Miles Udland, senior marketing editor at Yahoo Finance. Follow him on Twitter @MylesUdland and further LinkedIn. Read this and more market news on the go with the Yahoo Finance app Apple or Android.Yahoo Finance app.
The November jobs report is due in a few hours.
And while monthly inflation numbers have earned the title as the most important piece of economic data for investors over the past year, the jobs report should not be overlooked.
That’s largely because, according to Federal Reserve Chairman Jerome Powell, recent jobs reports have been just too good.
Speaking earlier this week, Powell said the labor market is “showing only tentative signs of recovery and wage growth remains well above levels that would be consistent with 2% inflation over time.”
“While job openings have fallen below their peak and the pace of job growth has slowed from earlier this year, the labor market remains unbalanced, with demand significantly outpacing the supply of available labor,” Powell said in a news conference. last month.
Economists expect the November jobs report to show that the US economy created 200,000 jobs last month and the unemployment rate is expected to remain at 3.7%. Missing these expectations will be (relatively) good news for the Fed, which is working to curb inflation by slowing the economy.
Or as Powell said in that same press last month, “Reducing inflation is likely to require a sustained period of below-trend growth and some easing of labor market conditions.”
The current economic expansion – and the feared recession – is determined by inflation.
Consumers were unexpectedly left with cash during the pandemic, forced into new ways to spend that money by the pandemic, while global supply chains faced unprecedented congestion.
A generation of investors and consumers who had never really seen inflation as a risk suddenly found their world defined by rapidly rising prices.
In the mid-2010s, investor fears about the global economy sliding back into recession centered on the risks of deflation. In today’s market, equities welcomed a slowdown in annual inflation growth from 7.9% to 7.7%.
Even allowing for the swear words that scold me for not understanding that markets care primarily about the second derivative – i.e. the change in the rate of change, not the rate of change itself – the series of events that led to an inflation rate of 7.7 % a good thing for markets would have seemed laughable a few years ago.
And yet here we are.
In contrast, the recession that followed the Great Financial Crisis was characterized by unemployment. Millions of workers lost their jobs after the housing crisis, and it took more than a decade for overall US employment to recover. Remember, this was the decade of the overeducated, underemployed recent college graduates.
When we observed in August that the “amazing” labor market recovery had been completed, this observation echoed what was seen as the most disheartening piece of post-crisis economic data: the endless grind for the US economy back to pre-crisis employment levels.
In the end, the journey took more than seven years after the GFC. After the pandemic-induced recession, the economy has lost more than 14 million jobs in less than two and a half years.
Of course, Federal Reserve officials play a big role in what investors focus their attention on.
Recent Fedspeak focused on officials wanting to see a different reading of inflation before assessing whether a slowdown from the current rate hike rate of 0.75% later this month is warranted.
What you hear less about from most central bankers these days is what kind of job growth they would like to see. That is, with the exception of Powell.
Because the Fed Chairman has be clear about the labor market conditions needed to bring this economy back into balance.
And he signaled that signs of weakness would be a welcome development for the central bank and financial markets, which now want the same thing: for inflation to finally come down.
What to watch today
8:30 a.m. ET: Change in nonfarm payrollsNovember (200,000 expected, 216,000 in previous month)
8:30 a.m. ET: Unemployment rateNovember (3.7% expected, 3.7% last month)
8:30 a.m. ET: Average hourly wagemonth-over-month, November (0.3% expected, 0.4% last month)
8:30 a.m. ET: Average hourly wageannualized, November (4.6% expected, 4.7% last month)
8:30 a.m. ET: Average Weekly Hours All EmployeesNovember (34.5 expected, 34.5 last month)
8:30 a.m. ET: Labor participation rateNovember (62.3% expected, 62.3% in previous month)
8:30 a.m. ET: Underemployment rateNovember (60.8% last month)
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