A strong job market should be good news but in an environment of high inflation, where paychecks aren’t keeping up with rising prices, a blockbuster jobs report may not make Americans feel good about the economy.
It could be a sign that the Federal Reserve will continue slowing the economy by raising interest rates — “the only tool it has to fight inflation,” wrote CNN executive editor David Goldman.
The U.S. job market is defying odds. Almost every industry added workers in September, including factories and construction companies, despite the strain of rising interest rates. The big worry with hot labor market is that it could force wages higher along with the threat of more inflation.
“The economy is roaring with the demand for workers literally through the roof,” said Chris Rupkey, chief economist at FwdBonds, in a note to clients on Friday. “Interest rates are likely to remain higher for longer to ensure the inflation fire is out.”
Despite the September job gains, wage growth was a modest 0.2 percent between August and September, and average wages in September were up 4.2 percent from a year ago.
“Wage growth is cooling so this doesn’t look like an inflationary job market,” said Julia Coronado, president of MacroPolicy Perspectives. “It’s kind of Goldilocks, actually.”
The unemployment rate held steady in September at 3.8 percent for the population at large. However, the unemployment rate for African Americans rose in September from 5.3 percent to 5.7 percent.
President Joe Biden’s approval rating is at the lowest level since he took office, according to responses to the October Investors Business Daily/TIPP Poll, which measures consumer confidence. Disapproval of Biden’s economic policies reached a new high amid rising interest rates, higher gas prices and renewed student loan payments.
The October IBD/TIPP Poll shows 54 percent of respondents disapprove of how he is handling the presidency while 36 percent approve. By comparison, in September, 49 percent disapproved of Biden’s job performance while 41 percent approved.
“A job market that has remained this healthy for this long really isn’t excellent news for average Americans struggling to pay their bills,” Goldman wrote. “Meanwhile, we remain in a ‘good news is bad news’ conundrum that makes most people feel like the US economy is in a bad spot.”
The stunningly hearty September jobs report could mean “maybe it’s time to hunt for some battered tech stocks,” wrote Brian Sozzi, executive editor at Yahoo Finance.
Tech stock earnings fell by mid- to high-single-digit percentages year over year in the first half of 2023, mostly due to weakening consumer demand, Sozzi wrote.
But on Friday, following the September jobs report, “markets reversed losses, and by the afternoon, stocks were solidly in the green. I liked that the gains in stocks came alongside another push-up in Treasury yields,” he wrote.
Some of the best performers were big-cap tech stocks such as Apple, Microsoft and Salesforce — “stocks that have taken it on the chin amid the rise in yields. (Tech stocks hate when yields rapidly advance as they have been doing.)”
While he acknowledged that one session doesn’t make a trend, Sozzi said, “the favorable action in beat-up tech stocks suggests investors are willing to hunt for perceived value inside an apparently still strong U.S. economy.”