The United States economy added a robust 467,000 jobs in January, the US Department of Labor said on Friday.
That was far, far better than most analysts were expecting and quells fears that the fast-spreading Omicron variant of COVID-19 temporarily dented the labour market recovery in the world’s largest economy.
“The labor market started the year off on a stronger-than-expected note defying expectations that the rapid spread of Omicron would lead to a temporary pullback,” said Oxford Economics chief US economist Kathy Bostjancic in a note to clients.
The US jobs market also closed out 2021 on a stronger footing than first thought. Jobs creation for November and December last year were revised up by a combined 709,000.
The nation’s unemployment rate edged up slightly in January to 4 percent after falling to 3.9 percent in December. But it’s not as bad as it seems at first glance because the number of people either working or actively looking for a job – a metric called the labour force participation rate – increased to 62.2 percent, the highest level since the coronavirus pandemic struck in March 2020.
The bump suggests that workers are moving off the sidelines – a development that is likely to cheer business owners who are struggling to fill a near-record number of job openings and have been sweetening benefits and pay packages to lure scarce job seekers.
That enhanced worker bargaining power was on display in average hourly earnings, which climbed 5.7 percent in December compared to the same period a year ago.
But as earnings go up, it further stokes inflation, which is also being fed by ongoing supply-chain disruptions and shortages of raw materials. That double whammy increases input costs for businesses, and they are increasingly passing on at least a portion of that financial burden to consumers.
That’s why the January jobs report falls at a critical juncture in the nation’s economic recovery.
US inflation is running at its hottest level in nearly 40 years and those higher prices erode purchasing power – undercutting the windfall from fatter paycheques.
Soaring costs for essentials like food, gasoline, and rent are also especially hard on low-income households that are forced to shell out a larger share of their financial resources to cover those basic needs.
Finally, too much inflation is bad for consumer confidence, which is bad for the economy. Because when consumers don’t feel good about their financial fortunes and prospects, it saps their spending mojo – and consumer spending drives some two-thirds of US economic growth.
Cue the Fed
For most of the recovery, the steward of the US economy, the Federal Reserve, has kept interest rates low to encourage jobs creation.
But late last year, with job openings abounding and inflation soaring, the Fed signalled a hard pivot away from job-boosting easy money policies and towards raising borrowing costs to keep a lid on rising prices.
Fed chief Jerome Powell said in January that the Fed will likely start raising interest rates in March. What’s more – he said that there is “quite a bit of room to raise interest rates without threatening the labour market”.
The Fed has a dual mandate to achieve maximum employment while keeping inflation under control. And right now inflation is running far above the Fed’s target rate of 2 percent.
The Fed insists there are no signs yet of a dreaded “wage-price spiral” – that’s when workers keep asking for a raise to keep up with inflation, feeding consumer demand for goods and services, which raises prices further.
If labour force participation continues to increase, it should help calm wage pressures. And Fed policymakers still think inflation will start to moderate later this year.
But the January jobs report is bound to fuel mounting speculation that the Fed could hike rates by as much as half a percentage point in March, or signal a more aggressive tightening cycle ahead.
SOURCE: AL JAZEERA
Stock futures rise after Dow falls for 8th-straight week in relentless sell-off
Stock futures rose early on Monday after the Dow Jones Industrial Average fell for its 8th straight week amid a broader market sell-off.
Futures on the Dow Industrial Average gained 245 points, or 0.78%. S&P 500 futures added 1.07% and Nasdaq 100 futures rose 1.19%.
The moves came after the S&P 500 on Friday dipped into bear market territory on an intraday basis. While the benchmark was down 20% at one point, it did not close in a bear market after a late-day comeback.
In Friday’s regular trading session, the S&P 500 closed 0.01% higher at 3,901.36 after falling as much as 2.3% earlier in the session. The Dow added 8.77 points at 31,261.90 after sinking as much as 600 points and the Nasdaq inched 0.3% lower.
The S&P 500 currently sits 19% off its record high while the Dow is down 15.4%. The Nasdaq is already deep in bear market territory, down 30% from its high.
Last week marked the Dow’s first eight-week losing streak since 1923, while the S&P 500 capped a seven-week losing streak, its worst since 2001.
The Nasdaq saw its seventh negative week in a row for the first time since March 2001. The tech-heavy index also saw its lowest intraday level since November 2020 on Friday.
Eight of 11 sectors ended the week in the red, led by consumer staples, which dipped 8.63% and had its worst weekly performance since March 2020. Energy finished the week on top, rising 1.09%. Consumer discretionary and communication services also finished the week more than 32% off their 52-week highs.
“Investors are trying to come to grips with what exactly is happening and always try to guess what the outcome is,” said Susan Schmidt of Aviva Investors. “Investors hate, and the markets hate uncertainty, and this is a period where they don’t have any clear indication on what’s going to happen with this push-pull between inflation and the economy.”
Investors are looking ahead to a new batch of earnings this week, including an array of big retail names. Zoom Video is set to report results Monday followed by Costco, Nvidia, Dollar General, Nordstrom and Macy’s later in the week.
US stocks suffer biggest daily drop in almost two years
US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.
The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. slid at least 5%.
Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.
The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.
In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”
In Europe, new-vehicle sales shrank for a 10th month in a row as the industry remains mired in supply-chain crises, while euro-area inflation plateaued at a record high. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank.
Netflix lays off 150 employees due to slow revenue growth and business needs
Netflix is reportedly laying off nearly 150 employees in the coming days due to disappointing earnings and slow revenue growth.
According to a Variety report, the Amazon Prime Video rival might also terminate its contract with contractual contributors.
The layoffs are about 2 per cent of Netflix’s US workforce. “As we explained [in reporting Q1] earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly U.S.-based,” a Netflix spokesperson said.
The statement further revealed that the decision was primarily driven by business needs rather than individual performance. Netflix reported $7.87 billion in Q1, which was short of Wall Street’s estimates of $7.93 billion.
The report further reveals that nearly 70 part-time employees in Netflix’s animation studio will have to pack up and leave. A report by The Verge stated that about 26 contractors working on Netflix’s fan-focused Tudum website might see a termination.
“A number of agency contractors have also been impacted by the news announced this morning. We are grateful for their contributions to Netflix,” the company said.
Netflix, in its recent earnings call, revealed that it lost thousands of subscribers, which is a first for the company in over a decade.
The company expects to lose an additional 2 million in the next quarter due to the ongoing war between Russia and Ukraine. Netflix has shut shop in Russia following the country’s invasion of Ukraine.
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