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Equities Mixed as Markets Digest Labor Market Data
Equity markets were mixed last week following a US labor market update. Global equities (represented by the MSCI All Country World Index) were up 0.60%, and domestic stocks (represented by the S&P 500 Index) were down -0.23%.
US Economy
The labor market update for February showed potential signs of softening although the number of jobs added for the month beat expectations. The US economy added 275,000 nonfarm payrolls in February, higher than consensus expectations of 200,000. However, January’s figures were revised lower from a hot 353,000 to 229,000. While nonfarm payrolls bested expectations for February, ADP’s private payrolls report came in at 140,000 jobs added, missing expectations of 150,000. The US unemployment rate also rose to 3.9% from 3.7%, marking its highest level in two years.
US Job Market Data
Total job openings as well as the quits rate, a measure of workers leaving jobs voluntarily, both continued to moderate according to the JOLTS data released last week for January. Lower job openings and quit rates can act as indicators for weakening demand for employment and lower confidence of workers to find new jobs. These also tend to point towards lower wage growth. In February, wage growth cooled to 4.3% year-over-year, down from its peak in March 2022 of nearly 6%.
Fed Meeting
During Fed Chair Jerome Powell’s testimony before Congress last week, his comments seemed less hawkish as he stated the Fed is “not far” from having the confidence to start cutting rates. Powell reiterated that the Fed continues to be data-dependent as they look for sustained downtrends in inflation. These comments in addition to cooling labor market data spurred fed funds futures markets to price in a 71% chance of a rate cut at the Fed’s June meeting as of the end of last week according to CME FedWatch Tool.
Looking Forward
This week the Consumer Price Index is scheduled to be reported following a hotter-than-expected month in January. The last CPI print came in at an annual rate of 3.1% for January but has been on a downward trend since its peak of 9% in June 2022.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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