A SLAYbor Market Update

January’s nonfarm payroll report was released this morning and was great news. Or bad news. Honestly, we’re not so sure anymore. 🤷

The economy added 517,000 jobs in January, blowing away the 187,000 consensus estimate. The blockbuster gain pushed the unemployment rate to a 53-year low of 3.4%. The labor force participation rate also ticked up marginally to 62.4% as higher wages lure people back into the workforce.

Meanwhile, wage growth continues to decelerate. While average hourly earnings rose 0.3% MoM as expected, their 4.4% YoY increase was down from 4.6% in December. 🔻

Ultimately, the labor market continues to spell trouble for the Federal Reserve. Despite Jerome Powell’s efforts to weaken growth and bring the labor market “back into balance,” it’s defied all odds and stayed historically strong.

Julia Pollak, ZipRecruiter’s chief economist, said today’s jobs report was almost too good to be true, “…Like $20 bills on the sidewalk and free lunches, falling inflation paired with falling unemployment is the stuff of economics fiction.”

In other words, the goldilocks situation that the stock and bond markets are currently pricing in is not often seen in reality. If the labor market remains this strong, it will keep wage growth strong and buoy demand. And that could lead to a re-acceleration in inflation sometime in 2023. 😨

As a result, the primary risk to the market remains higher-than-expected inflation. That’s why risk assets gave back some of their gains today. For now, we’ll have to wait and see if January’s report was an anomaly or if labor market strength ultimately begets more strength. 👀

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Powell Retakes Perch Amid Employment Data

Fed Chair Jerome Powell’s two-day testimony continued today and was far less eventful than yesterday’s.

So, what, if anything, changed today? Well, Powell appeared to make one “notable” change to his opening statement delivery, according to Nick Timiraos of The Wall Street Journal. 🤔

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An Economic Buffer

We’ll take a quick break from earnings and discuss the economic data released today since there was a lot… 😮‍💨

First up, the U.S. trade deficit in goods increased by 2% to $91.5 billion in January, slightly above its fourth-quarter average. Wholesale inventories fell 0.4% in January after a 0.1% gain in December. Retail inventories rose 0.3%, following a 0.4% increase in December. After the inventory numbers helped buoy Q4 GDP, these early readings indicate they could be a drag on Q1’s numbers. 📦

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Global PC Sales Tumble

Manufacturers, retailers, and other players have been telegraphing a Personal Computer (PC) slowdown for several quarters. The questions have always been how long it would last and how deep the slowdown would be. Today we got a bit more color on the current environment.

Market research firms IDC and Canalys each put out separate reports today indicating that global PC shipments in Q1 fell by roughly 29% YoY. Their research suggests that Apple fared the worst, with shipments falling nearly 41% YoY. Competitors Dell, Lenovo, Asus, and HP closely followed. 🔻

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