Wednesday, March 8, 2023

Markets struggle while Powell testifies to Congress

Dow fell 43, advancers  over declines about 3-2 & NAZ went up 46.  The MLP index slipped 1 to the 227s & the REIT index bounced back 3 to the 383s.  Junk bond funds drifted lower & Treasuries saw buying which took yields lower.  Oil was off another 1+ to the 76s & gold re.covered 4 to 1824

AMJ (Alerian MLP Index tracking fund)


 

 




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Job openings declined slightly in Jan but still far outnumber available workers as the labor picture remains tight, according to data just released.  The Labor Dept's Job Openings & Labor Turnover Survey (JOLTS) showed there are 10.8M openings, down some 410K from Dec.  That equates to 1.9 job openings per available worker.   Despite the decline, the total was still higher than the estimate of 10.6M.  Dec's number also was revised up by more than 200K.  Federal Reserve officials watch the JOLTS report closely as they formulate monetary policy.  In remarks on Congress this week, Fed Chair Jerome Powell called the jobs market “extremely tight” & cautioned that a recent spate of data showing resurgent inflation pressures could push interest rate hikes higher than expected.  The JOLTS report showed that hiring was brisk for the month, with employers bringing on 6.4M workers, the highest total since Aug.  Total separations were little changed, while quits, a signal of worker confidence in mobility, fell to 3.9M, the lowest level since May 2021.

Job openings declined in January, but they still far outnumber available workers

Hiring by US companies increased more than expected in Feb, pointing to a labor market that remains tight even in the face of higher interest rates, according to the ADP National Employment Report.  Companies added 242K jobs last month, beating the 200K gain that was predicted.  It marks a major increase from the upwardly revised gain of 119K recorded in Jan.  The report comes as the Federal Reserve wages the most aggressive fight since the 1980s to crush inflation & slow the labor market with a series of rapid interest rate increases.  Fed policymakers have made it clear that they anticipate unemployment to climb as a result of higher borrowing costs, which could force consumers & businesses to pull back on spending.  The bulk of the gains in Feb stemmed from the leisure & hospitality industry, which added 83K new workers.  Other industries that saw payroll growth last month included financial activities (62K), manufacturing (43K) & education & health services (35K).  The biggest losses, meanwhile, were in the professional & business services sector, which shed 36K positions in Feb & construction also saw a decline in payrolls of about 16K.  By size, only large & medium businesses saw job gains last month, with a combined increase of 308K.  Small businesses, which have struggled the most with the inflation, lost 61K workers.  The losses were most pronounced in businesses that employ 1-19 workers.  In a potentially worrying sign for the Fed as it tries to wrangle inflation under control, wages remained elevated in Feb.  Although pay increases decelerated slightly, wages fell 0.1 percentage point from the previous month, they are still up 7.2% from one year ago.  "There is a tradeoff in the labor market right now," said Nela Richardson, chief economist, ADP.  "We're seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near term."

Private sector job growth grows by 242,000 in February, better than expected: ADP

Americans are feeling increasingly gloomy about their personal financial prospects over the next year as high inflation & rising interest rates squeeze consumers.  A new survey from Fannie Mae shows that just 31% of respondents expect their personal financial situation to improve over the next year, the lowest reading in a series that first began in 2010.  At the same time, just 28% of Americans believe the economy is on the right track, according to the survey.  The decline in sentiment comes as the Federal Reserve signals that interest rates may need to climb higher than previously projected as a result of underlying inflationary pressures within the economy.  In testimony before the Senate Banking Committee Federal Reserve Chair Jerome Powell said, "The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated."  Hiking interest rates tends to create higher rates on consumer & business loans, which slows the economy by forcing employers to cut back on spending.  Higher borrowing costs are already squeezing consumers in the form of steeper mortgage rates, credit card fees & auto loans.  On top of that, stubbornly high inflation has already created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent.  The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.  The Labor Dept reported in Feb that the consumer price index rose 0.5% in Jan, the most in 3 months.  The annual inflation rate also surprised to the upside at 6.4%.  And despite continued strength in the labor market, the survey also pointed to growing concerns among workers about job security.  The share of employed respondents who said they are worried about losing their job climbed to 24%, the highest in more than 2 years.  Fed officials have made it clear that they expect unemployment to climb as a result of higher rates, which could force consumers & businesses to pull back on spending.  Updated projections from its Dec meeting show that officials expect unemployment to rise to 4.5% by the end of next year, up from the current rate of 3.5%.  That could mean more than 1M Americans lose their jobs between now & the end of 2023.  The Fannie Mae survey echoes findings from Gallup published last month, which showed that ½ of Americans say they are financially worse off now than they were a year ago, the highest amount since 2009.

Americans feeling most pessimistic about financial future since 2010, survey shows

While job data looks fairly good, that is not bringing optimism to consumers.  If there is an official recession, jobs will be lost & workers are understand that.

Dow Jones Industrials

 






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