Why the business report still matters to investors: The morning brief

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Friday, December 2, 2022

By today’s newsletter Myles Udland, senior market editor at Yahoo Finance. Follow him on Twitter @MylesUdland and continues LinkedIn🇧🇷 Read this and other market news on the go with the Yahoo Finance app apple or android🇧🇷Yahoo Finance Software.

The November jobs report will be released in just a few hours.

While the monthly inflation numbers took the title as the most important economic data for investors over the past year, the jobs report cannot be overlooked.

The main reason for this, according to Federal Reserve Chairman Jerome Powell, is that recent job reports were very good.

In a speech earlier this week, Powell said the labor market was “showing only early signs of rebalancing, with wage growth remaining well above levels consistent with 2% inflation over time.”

“Although vacancies are down from high levels and the pace of job gains has slowed since the start of the year, the labor market continues to be out of balance, with demand significantly outstripping the supply of available workers,” Powell said. said at a press conference last month🇧🇷

Economists expect the November jobs report to show that the US economy added 200,000 jobs last month and that the unemployment rate will be at 3.7%. Avoiding those expectations will be (relatively) good news for the Fed, which is trying to slow inflation by slowing the economy.

Or as Powell put it last month in the same press release: “Reducing inflation will likely require a sustained period of low-trend growth and some softening of labor market conditions.”

US Federal Reserve Chairman Jerome Powell attends a press conference in Washington in November. 2, 2022. On Wednesday, the US Federal Reserve raised its fourth consecutive three-quarter interest rate amid the worst inflation in four decades. (Photo by Liu Jie/Xinhua via Getty Images) — US Federal Reserve Chairman Jerome Powell attends a press conference in Washington in November. 2, 2022. (Photo by Liu Jie/Xinhua via Getty Images)

The current economic expansion – and the much-feared recession – is determined by inflation.

Consumers have been unexpectedly flush with cash during the pandemic, forcing new ways of spending because of the pandemic, while global supply chains have faced unprecedented disruptions.

A generation of investors and consumers who had never faced inflation as a risk suddenly found their world defined by rapidly rising prices.

In the mid-2010s, investors’ fears that the global economy would go into recession again were based on deflationary risks. Stocks appreciated in the current market a a slowdown in annual inflation growth from 7.9% to 7.7%.

I allow those who accuse me of failing to understand that markets are primarily interested in the second derivative—that is, the change in the rate of change, not the rate of change itself—that led to a good 7.7% inflation rate. something for the markets seemed funny a few years ago.

And yet here we are.

The recession that followed the Great Financial Crisis, by contrast, was a recession defined by unemployment. Millions of workers lost their jobs after the housing crisis, and it took the best part of a decade for total employment in the United States to recover. Remember, this was the decade of the overeducated, unemployed, recent graduate.

Again in August when he noted the “amazing” recovery of the labor market when completed, the observation echoed what was seen as the most depressing piece of post-GFC economic data: the endless grind for the US economy to return to pre-crisis employment levels.

Ultimately, the journey after the GFC took more than seven years. After the recession caused by the pandemic, the economy recovered from more than 14 million job losses in less than two and a half years.

Federal Reserve officials, of course, have a big role to play in where investors are paying attention.

Recently, Fedspeak put officials in the spotlight wants to see another reading on inflation before judging whether there is a slowdown the current 0.75% rate of interest growth guaranteed at the end of this month.

What you hear less from most central bankers these days is what kind of job growth they want to see. That is, except for Powell.

Because the Fed chairman there is it became clear about the labor market conditions needed to bring the economy back into balance.

And he said signs of weakness would be a welcome development for the central bank and financial markets, which now want the same thing – inflation to finally fall.

What to Watch Today

economy

8:30 a.m. ET: Change in Off-Farm Labor WagesNovember (200,000 expected, 216,000 last month)
8:30 a.m. ET: Unemployment rateNovember (3.7% expected, 3.7% in previous month)
8:30 a.m. ET: Average Hourly Earningsduring the month, November (0.3% expected, 0.4% in the previous month)
8:30 a.m. ET: Average Hourly Earningsannualized, November (4.6% expected, 4.7% previous month)
8:30 a.m. ET: Average Weekly Hours All EmployeesNovember (34.5 expected, 34.5 in previous month)
8:30 a.m. ET: Labor Force Participation RateNovember (62.3% expected, 62.3% previous month)
8:30 a.m. ET: Underemployment rateNovember (previous month 60.8%)