Markets React to February Jobs Report
Stock market futures soared during Friday morning trading following news of a stronger-than-anticipated monthly jobs report. The Dow Jones Industrial Average climbed 0.6% while the Nasdaq 100 futures rose 0.7%. Meanwhile, the S%P 500 gained 0.5%. The Department of Labor said nonfarm payrolls in February surged a seasonally adjusted 313,000 – the strongest monthly gain in two years.
Many investors keenly followed Friday’s job report for rising inflation. After a volatility burst that shook stock markets after January’s employment report, economic experts were looking forward to a not-so-rapid wage growth. They were expecting the rate of unemployment to go down to 4% and a 200,000 nonfarm payroll growth. Wage figures for January were at their best twelve-month gain since the end of the recession.
The biggest concern for investors and companies is that while higher wages are good for consumers, they can make inroads into corporate profits. That is because businesses will be required to create expectations for increased inflation and to pay more to employees. And when that happens, the Federal Reserve usually tightens its monetary policies faster than anticipated.
American stocks generally tend to climb for months while expecting fewer signs of monetary policy support. However, they have become very sensitive to higher interest rates signs since the start of February, according to Quant Insight’s market analysis.
The job report also comes after President Donald Trump signed off new import tariffs on aluminum and steel but excluded some American, while leaving the door open for others to apply for exemptions. However, news of Trump’s agreeing to meet with North Korea’s leader Kim Jong Un did not have a significant effect on Wall Street.
The meeting would be the first time that a serving American president has shared a table with North Korea’s heavily militarized leadership. Kim reiterated that he was ready and willing to stop his missile and nuclear tests while his country engages in denuclearization talks, cooling down geo-political fears among some participants of the stock markets.
According to the Labor Department, last month’s unemployment rate stood at 4.1% and the economy welcomed 313,000. The unemployment rate was kept steady by an increased rate of labor force participation, which was at its highest in recent months.
The total counted as “not working” stood at over 95 million after tumbling by 653,000. The number counted as “working” stood at 155.2 million after surging by 785,000. Real unemployment rate – a measure that considers the underemployed and those not included in the workforce – remained unchanged at 8.2%.
Construction took the lead as the largest employer, with more than 61,000 new jobs. It was followed by business and professional and retail services, each with 50,000, and manufacturing with 31,000. Financial activities, health care, and mining added 28,000, 19,000 and 9,000 new jobs respectively. The average work week in February was 34.5 hours after rising by 0.1 hours.
Sources
https://www.nytimes.com/2018/03/09/business/economy/jobs-report.html
https://www.ft.com/content/8c7f1d96-2392-11e8-ae48-60d3531b7d11
