7 October 2022
If you are covering the latest US employment statistics, please find below a comment from Paul Craig, portfolio manager at Quilter Investors:
“With the US jobs report coming in slightly better than expected and the unemployment rate going down, we remain in a search of a middle ground. In normal circumstances, a better-than-expected jobs report would be considered a good thing and a likely catalyst for rise in equity markets. But these days, we live in a parallel world where good news is bad, and bad news is good as investors try to anticipate the US Federal Reserve’s next move and whether or not they will temper their hawkish stance.
“With this jobs report it seems clear we are on course for another significant hike from the Fed, with the market pricing in a 75bps rise in interest rates at its next meeting. This report will simply solidify its hawkish rhetoric even if that translates into setting policy by looking in the rear-view mirror as it looks to tame the inflation beast that it has lost a handle on. Equities will naturally react negatively as a result, stoking the volatility we have seen of late as geopolitical issues once again come to the fore. With midterms around the corner and OPEC confirming it is to cut production, consumers will continue to feel the financial pain as they head to the polls.
“How long the jobs markets can maintain this strength remains to be seen. The rate of growth is slowing and recession warnings continue to flash. Investors are anticipating a shallow contraction coupled with a sharp fall in corporate profits. This is likely to have a significant impact on the employment market and we would expect to see quit rates beginning to decline as employees start to see that the grass is perhaps greener on the side they are already standing. This could also take some of the sting out of the wage growth tail.”
