The Employment Report Rally

In this buzz: Strong Job Market Report 🤩; Nonfarm Payrolls; Is it Inflation or not?; Average hourly earnings and more …

Strong Job Market Report 🤩:
On Friday, the DJIA and the SPY indices both closed over 2% following a strong job market report that topped analysts’ expectations. Rather than stoking inflation fears and concerns the Fed would continue to hike rates unabashedly and risk recession, this report soothed equity investors.

Nonfarm Payrolls:
While nonfarm payrolls, up 223,000, beat the consensus forecast of 200,000 and the unemployment rate fell to 3.5%, 0.2 percentage points below expectations, wage grow was less than expected.
– Average hourly earnings rose 0.3% for the month and increased 4.6% versus a year ago.
! These figures were below the estimates for growth of 0.4% and 5% respectively.

A Silver Lining:
More importantly they were enough of a silver lining to enable investors to dive back into the market given the first signs that the labor market is cooling and taking inflation lower with it. The stock market’s dominant concern about data now is whether it is inflationary or not.
It not, pent up demand leads to rallies like Fridays, while any signs of inflation heating back up could send investors running to the exit.

Plenty of Analysts:
and even Fed officials have indicated relief about the recent downticks in inflation readings but caution we’ll need to see continued improvement before the Fed can ease up on rate hikes.

As things currently stand, the expectation is for another hike in the Fed Funds rate of 25 basis points at the meeting which concludes February 1.