The US economy created 517,000 jobs in January, while unemployment dropped to 3.4%… The Bureau of Labor Statistics reported that jobs growth far outpaced the expected 188,000 and revised the December numbers higher to 260,000.
What it means – It would seem that these numbers confirm the Fed’s view of a tight labor market, which would call for continued aggressive action on inflation. But before we hyperventilate about the Fed potentially pushing us into a recession after strong jobs numbers, we need to remember that this is the month in which the BLS revises its population and workforce estimates to match with unemployment and census data. The mathematical somersaults can lead to weird outcomes, like half a million new jobs when hiring managers report more applicants and an easier time finding staff.
The average workweek for all employees rose by 0.3 hours, while the average hourly earnings increased 0.3%. Over the past year, average hourly earnings rose 4.4%, still well below the rate of inflation.
Federal Reserve Raised Overnight Rate by 0.25% to a Range of 4.50% to 4.75%… The bankers estimated that they will raise rates at least two more times in this cycle, at the March and May meetings.
What it means – Either the members of the Federal Open Market Committee (FOMC) or investors in general will be wrong. Even though the central bankers specifically informed the world that they will raise rates at least twice more, likely pushing the overnight rate to 5.25% investors pushed equities to new highs for the year and drove down long interest rates. While in his press conference Chair Powell sounded hopeful about avoiding a prolonged recession, he also pointed out that the tight labor market made it unlikely that inflation would fall near the Fed’s 2% target anytime soon.
Fighting the Fed tends to be a losing game, but investors have had the upper hand for three months, and they might be right when forecasting the future economic data will stay the fed’s hand. We remain cautious, it’s prudent to take the central bankers at their word before committing a lot of capital.
U.S. Employment Cost Index Rose 1% in the Fourth Quarter… Wages and benefits increased by 5.1% last year.
What it means – The Employment Cost Index (EIC) expanded at a bit slower pace in the last quarter of 2022, but it’s still near the highest level in 40 years. This is the sort of thing that gives Chair Powell and the other members of the FOMC heartburn. Walmart just announced it will increase its base wage from $12 to $14 per hour. It’s arguable that employees at that level will spend most of the extra income, thereby fueling wage-push inflation. If enough companies raise wages to attract employees, then we might see inflation remain well above the Fed’s 2% target.
Fourth-Quarter Rental and Homeowner Vacancy Rates Remain Near Four-Decade lows… The rental rate dipped back to 5.8%, while the homeowner vacancy rate eased to 0.8%.
What it means – These statistics, along with the solid shape of the mortgage market, are the counterbalances to the recent price hikes and mortgage rates that normally would crush the residential real estate market. Potential buyers have stepped away for the moment, but with few homes, either rentals or owner-occupied, sitting empty, there aren’t a lot of choices. Potential buyers can choose to rent while waiting for lower prices, but they aren’t likely to snag falling rents in the tight market. Or, they can make the plunge and buy a home, but inventory is light and mortgage rates remain just over 6%. It’s not a great time to rent or buy… which likely is why so many people under 30 still live with their parents.
Blogger in Germany Killed a Look-a-Like She Met Online to Fake Her Own Death… Shahraban K., a 24-year-old Iraqi beauty blogger living in Germany, searched Instagram for other bloggers who looked like her. She found one in Khadidja O., whom she and her boyfriend Sheqir K. then asked to meet in person. Once together, Shahraban and Shqir stabbed Khadidja repeatedly and left her in the back seat of Shahraban’s Mercedes. Shahraban’s parents eventually found the car and were fooled by the ruse, identifying the body as their daughter, but an autopsy the next day revealed the truth. It turns out that Shahraban wanted to stage her own death to escape family disputes at home. Apparently Shahraban and Sheqir aren’t fans of Law & Order or other police procedural shows, or they would have known that a quick DNA comparison to her family members would expose the scam.
Data supplied by HS Dent Research
“When the facts change, I change my mind.
What do you do?” ~ John Maynard Keynes
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