04 February 2022
If you are covering the US non-farm payrolls, please see the following comment from Hinesh Patel, portfolio manager at Quilter Investors:
“The addition of almost half a million jobs is a massive upside print against consensus expectations. The unemployment rate may also have risen a fraction, but this is not without good reason given the participation rate is rising.
“There are a few factors at play here pushing people back into work. The first is the fading of the virus and the reality that the Omicron variant was significantly less severe than originally feared. Then there’s the fact that people are perhaps not quite as wealthy as they originally thought they were last year and the year before when they decided to leave the labour market. Related to this is the need for many to work given the price pressures being experienced which is creating a global cost of living crisis.
“The buoyant labour market is teeing things up nicely for the Fed to tighten policy further. A 50 basis point increase in rates really could be on the cards.
“However, behind the strong labour market stats lies a couple of areas to balance the bullishness. The first is that hours worked has not increased, which will be watched carefully given some PMI measures are easing at the same time. The second is the fact that the bulk of the gains are in leisure and hospitality. Job growth in the manufacturing sector was actually quite soft.
“Overall, the numbers are strong but it’s important we don’t get carried away. More volatility in markets is expected and investors shouldn’t read too much into one data point. Instead, investors should focus on the longer-term trends and stick to quality as weaker businesses will be less able to pass on rising costs.”
