Market drivers: Jobs & Wages, Not Earnings?
Wall Street analysts’ attention shifted back to fundamentals?
Maybe the Mega cap companies quarterly earnings are still very much in focus but for the rest, it seems like despite their commendable Q1 earnings, their weaker outlook for current Q2 seems to have spooked market overall.
This brings to my post’s probing question.
ADP Employment report.
On Wed, 01 May 2024 the ADP Non Farm employment report was released.
This report measures the monthly change in non-farm, private employment, based on the payroll data of approx 400,000 US business clients.
It is a good predictor of the Bureau of Labour Statistics's non-farm payroll report.
For April 2024, private sector employment increased by 192,000 jobs, a fall of -7.69% from March data.
Although it came in +7.26% higher than Analysts consensus.
The report also highlights a 5.0% YoY increase in annual pay, implying wages are keeping up with the current economic climate.
Overall, the ADP Employment Report for April 2024 confirmed that the US labor market is robust, with broad-based hiring and rising pay, directly “confirming” that US interest will not be reduced anytime soon.
This was addressed by Mr Powell during post FOMC meeting conference on Wed (01 May) afternoon in greater details.
The Fed Chair and his team collectively, has made the following decisions:
They acknowledged stalling progress in bringing down inflation to its 2% goal and opted to hold its benchmark interest rate at current levels.
Fed officials are “prepared to maintain the current target range (5.25% - 5.50%) for the federal funds rate for as long as appropriate.
The Fed would slow the pace of reducing its balance sheet starting June 2024, to ensure money markets don’t experience an episode of volatility & stress as seen in September 2019.
Most importantly, Mr Powell in his speech has pushed back against chatter of stagflation and the Federal Reserves needing to raise rates again.
US Weekly Jobless claims.
Rounding things off, US weekly jobless claims for week ending 27 Apr 2024, echoed the same sentiments.
Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 208,000.
Economists (polled by Reuters) had an estimate of 212,000 claims in the latest week. (see below)
Weekly jobless claims remained the same for last week (27 Apr) and last last week (20 Apr).
In 2024, so far claims have been bouncing around in a 194,000-225,000 range.
At the same time, unadjusted claims decreased by -13,884 to 188,740 last week.
In summary, layoffs remain very low as companies hang on to their workers following challenges finding labor during and after the COVID-19 pandemic.
Jobs Openings & Labour Turnover survey (JOLTs)
In contrast, the latest JOLTs shows that job openings has fallen to a 3-year low in March 2024. (see above)
On Wed, 01 May 2024 - US Bureau of Labor Statistics (BLS) revealed in its Job Openings and Labor Turnover Survey (JOLTS), the number of job openings reached 8.488 million.
This figure was -325,000 below February's revised count of 8.813 million (originally reported as 8.756 million).
March 2024 data also came in short of market's expectation of 8.680 million.
This report points to a potential moderation in the red-hot job market of 2022 and early 2023.
Fewer openings could ease pressure on wages and inflation, which has been a major concern for the Federal Reserve.
However, it could also indicate slowing economic growth as businesses are hiring less aggressively.
US Non-Farm Payroll.
On Fri, 03 May 2024, the mother of all job reports - US Non Farm payroll (for April 2024) will be released.
This will be the last of jobs-related report for this month and the most crucial to the Fed.
It helps to determine the scope and timing of the Fed interest rate cuts this year and it has a significant impact on the market sentiment and the US Dollar in the near term.
Forecasts.
The Nonfarm Payrolls report is expected to show that the US economy added 243,000 jobs in April 2024.
Sharply lower than the 303,000-jobs created in March 2024.
Job gains “should” also be slightly below the 276,000 monthly average for Q1 2024.
Unemployment Rate.
The Labor Department's employment report is also expected to show the unemployment rate holding steady at 3.8% for the 27th straight month.
While, Average Hourly Earnings, (important gauge of wage growth), a key driver of core services CPI inflation, will also draw plenty of attention.
They are expected to slow a tick to 4.0% YoY.
If you surf the internet, there are more news coverage on Jobs & Wages, compared to Corporates quarterly earnings - at least for this week !
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Do you think Non Farm Payroll for April will be lower than March’s data ?
Do you think agree that US market this week and maybe into next Mon / Tue will be dominated by Jobs & wages data ?
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