Working Man: Jobs, Jobs, Jobs!
Friday saw the markets down despite what looked like great news for the economy and FED. It was announced that the December U.S. unemployment rate dropped to a rate of 4.1% from a previous 4.2%. Additionally, nonfarm payrolls increased by 256,000 in December and hourly earnings rose 0.3% to cap a year-on-year rise of 3.9%.
This report followed concern from the FED that they would be sensitive to additional rate cuts as the new Trump administration eyed tariffs that markets would view inflationary. However, at least for December, the labor market showed short-term resilience or at least has taken a wait-and-see attitude, as economic expansion seemed to be the trend for the New Year.
Quite the opposite of a slowdown, there has been a broad indication of job growth across many industries, including retail, healthcare, leisure, and hospitality. This might explain the recent pullback in markets given that this data supports the FED pause in rate cuts and potentially sets up a string of ongoing robust employment reports that would cause inflationary fears to resurface, at least from a wage perspective, yet supporting the theory that consumption will remain steady.
Hopefully, this is an early good sign for the earnings reports coming in earnest next week, starting with financials like Wells Fargo, JP Morgan, Goldman Sachs, and many others. The strength of the market has been justified by a solid forecast of S&P 500 earnings for the 4th quarter, which is up for the year by around 9.5%, taking out the energy sector year-over-year, which is closer to 12.4%. As of this writing, the short list of reports is already there, and about 75% have reported above expectations. See the Refinitiv chart below for sector forecast earnings and revenue growth.
Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.