PMI and other economic data show that economic activities have decreased in recent months. At the same time, we cannot see the direct reflection of these data on the Labor market, which likely means that we will have a delayed response than saying the economic condition is good.
While Wednesday’s published JOLTs Job Openings for November show 10.458M open vacancies, more than 10.000M, which is lower than the 10.512M open positions seen in the previous month, on top of that, initial jobless claims in 2022, except for five weeks seen in March, April and September, always printed above 200K. For the week ended December 30, Initial Jobless Claims at 204K were published, much lower than 225K estimates and 223K of the week ago.
Nonfarm payroll growth has seemed at odds with other economic data.
On the other hand, according to the latest job cuts report from employment firm Challenger, Gray & Christmas, Inc. released on Thursday, US businesses were cutting 43,651 jobs in December 2022, down 43% from the number of cuts announced in November. However, looking at 150,000 layoffs in 2022 just in the tech industry shows that condition is much more worrying, and trusting just NFP numbers could be wrong. Especially if we consider the recently published news about Salesforce (NYSE: CRM) Inc., which plans to eliminate about 10% of its staff, and Amazon.com (NASDAQ: AMZN), which plans to cut more than 18,000 jobs, should watch the numbers with more doubts.
Other economic data, including PMI and retail sales, also show slower economic growth in recent months, but still, labor demand is going fine. In short, Job openings and hiring plans have declined since the start of 2022, and the trend in layoffs is no longer improving, while the main reason for strong demand is underwhelming supply. Therefore, the numbers’ meaning is different from what they show.
US Bureau of Labor Statistics will release its data on Friday, January 6, and we are waiting to see the nonfarm payrolls in December decrease to 200K, down from 263K in November. Average Hourly Earnings are also expected to rise by 0.4% monthly and 5.0% annually, both less than the previous month. However, participant and unemployment rates should not change from 62.1% and 3.7% in November.
Expected data and examining other economic data confirm that the labor market is weakening. Even though Wednesday’s published minutes of the December FOMC meeting confirm that most members still support the hawkish tones and higher rates, weaker employment data, especially if it will release weaker than expected (Less than 200K NFP numbers or higher than 3.7% unemployment) will encourage the Fed members to slow down in their tightening measures. A less hawkish Fed will help the stock markets to rise and increase the pressure on the US dollar but remember that if your reason to raise the stock prices is weaker economic data, it cannot last long.
On the other hand, if labor data once again for the ninth consecutive month printed better than expected numbers, then with the hawkish tones we saw in Fed minutes, we can expect lower prices for stock markets and higher rates for the US dollar. However, the trend would be weak.