Investors celebrated cooling wages, but the layoff-laden labor market’s still too hot for comfort
Oh the weather outside is frightful… but the December jobs report is apparently delightful. Stocks rallied Friday after fresh labor data showed a slowdown in wage growth. Normally, that wouldn’t be a great sign, but in this “good is bad” economy it serves as more evidence that inflation is cooling. Read: the Fed’s rate-hiking crusade is working.
But also: The job market’s still red hot. US employers added a stronger-than-expected 223K jobs last month and the unemployment rate fell to 3.5% (near historic lows).
But still: Investors celebrated cooling wages, which can translate to cooling prices, which could translate to the Fed being less aggro with rate hikes.
Everyone’s worried about jobs… and no one’s worried about the job market? We’re seeing this paradox playing out: Americans are on edge over job security, but in November there were 1.7 openings for every available worker. Still, job growth is losing steam (employers are adding fewer roles each month) and mass layoffs are only heating up.
Tech layoffs are happening at the fastest rate since the pandemic: last week Amazon announced plans to lay off 18K+ employees and Salesforce said it’s cutting 8K. Online styling service Stitch Fix said it would let go of 20% of staff, while struggling crypto lender Genesis slashed 30%.
Not just tech: While tech is a rate-sensitive industry, others like Goldman Sachs, Dodge maker Stellantis, and Redfin have announced big cuts.
The labor market needs to get more wrong to feel right… The strong job market is the last remnant of the pandemic-stimulus era (recall: near-zero interest rates, fat checks). Job data is a lagging indicator, and we’re finally starting to see hawkishness catch up to it. But Fed officials said they’d need to see sustained cooling before easing up on hikes — a scenario investors are hungry for. At least the trend is moving in the right (cough, wrong) direction.