Another shockingly good jobs report shows America’s economy is booming – CNN
From CNN’s Alicia Wallace, Elisabeth Buchwald, Bryan Mena and Nicole Goodkind
Updated
3:16 p.m. ET, February 2, 2024
Strong job market is powering ‘virtuous cycle’ in the economy, White House adviser says
From CNN’s Matt Egan
The hot job market is creating a positive feedback loop in the American economy, White House economist Jared Bernstein said Friday.
During a Zoom with reporters, Bernstein argued that the blow-out January jobs report “tells an unequivocal story of a very strong jobs market.”
Bernstein, chair of the White House Council of Economic Advisers, pointed to how unemployment has remained below 4% for the 24th month in a row.
The strength in the job market is powering a “virtuous cycle” in the economy, Bernstein said, noting that consumer spending makes up 70% of GDP.
The thinking is that as long as consumers have jobs, and paychecks are beating inflation, Americans can keep shopping. And that in turn should create new jobs, and so on.
Still, some economists worry the January jobs report paints a picture of a job market that is too hot — a concern that could prevent the Federal Reserve from cutting interest rates anytime soon.
Bernstein declined to weigh in on Fed policy, but said the White House is “always happy to see a very strong jobs market.”
“We’re particularly happy to see wages outpacing prices. That’s so important for families like the one the president grew up in,” he said.
Stocks had a great month. What comes next might not be so cheery
The S&P 500 was higher Friday after white-hot tech earnings balanced out some negative sentiment from the blowout jobs report, which left investors mulling the Federal Reserve’s next move.
But the Dow Jones Transportation Average, which tracks 20 US transportation stocks from railroads to airlines to delivery, has fallen 1.6% this year through Thursday’s close, underperforming the broader Dow industrials’ 2.2% gain during that same period.
That’s a reversal from the transportation index’s nearly 6% gain in December, as optimism that the economy would see a soft landing, or a marked decline in inflation without spurring a recession, sparked a gangbusters “everything” rally across markets.
As that optimism dims, some investors worry that the decline in transportation stocks suggests rough times ahead for the economy. The transportation index tends to fall when the economy deteriorates, as demand for travel and goods wanes.
On Friday mid-afternoon, the Dow transports rose 1.2% as investors parsed the blockbuster January jobs report. But small-caps continued to slide. The Russell 2000 fell 0.9%.
Why productivity matters
US worker productivity grew 3.2% in the fourth quarter, surpassing expectations for a 2.1% gain, according to a Bureau of Labor Statistics report released Thursday.
That’s a key piece of data, since productivity growth can help reduce inflationary pressures.
More good news for American households came in the wage growth data released Friday as part of the jobs report. While the estimated 4.5% annual hourly earnings growth may trigger a dull headache for the Federal Reserve, it’s ultimately good for the American psyche, said Joe Brusuelas, chief economist and principal at RSM US.
“It’s about jobs, and it’s about what people make, and this data reflects the increase in productivity. Improved productivity leads to improved number of jobs, better pay and rising living standards. It’s that mythical tide that lifts all boats.”
Diane Swonk, chief economist of KPMG, told CNN this week that rising productivity could likely be attributed as a result of the interest rate hikes and the labor market getting back into better balance following the pandemic recovery.
“What we saw as rates went up is that finally workers that were in their jobs got to learn their jobs and get training that had been completely sidelined by the hiring frenzy,” she said. “That helped productivity growth, along with the fact that firms could finally take a breath and leverage the technologies that they so rapidly embraced online.”
Stocks gain as investors parse jobs data
Stocks rose Friday midday as investors continued to look through the latest jobs report.
The Dow rose 43 points, or 0.1%. The S&P 500 gained 0.9% and the Nasdaq Composite climbed 1.5%.
All three indexes are on pace to end the week higher, despite the selloff on Wednesday after Federal Reserve Chair Jerome Powell signaled that the central bank is unlikely to cut rates in March. The supercharged January jobs report supports that indication, some investors say.
Demand for services — and jobs — remains at a fever pitch
While the leisure and hospitality industry added a mere 11,000 jobs in January, the critical service sector registered its 36th consecutive month of job gains. Post-pandemic, services businesses have benefited from Americans’ strong desires to spend money on experiences.
As that demand remains at a fever pitch, one new bar and restaurant in Minneapolis is seeing the effects.
Jillian Hiscock is about a month away from opening A Bar of Their Own, which exclusively will show women’s sporting events. The concept, inspired by The Sports Bra in Portland, Oregon, has garnered overwhelming support from the Twin Cities community since Hiscock floated the idea last spring and ran a crowdfunding campaign to get it off the ground.
The same was true for the hiring efforts: Hiscock received 150 applications in two days’ time for 25 to 30 open positions.
“Since things have opened back up [following the pandemic], we’ve had a lot of folks whose relationships with work has fundamentally changed,” she said. “Showing up and just doing a thing for somebody that you feel doesn’t care about as a human is less interesting to people now, because we all know how quick that can be taken away.”
People want a better balance between their job and personal life, she said.
“People were really excited about this, not just seeing this as another job, but seeing this as an opportunity to be a part of something bigger,” she said.
Biden heralds January jobs report
President Joe Biden touted the Labor Department’s latest jobs report showing that hiring accelerated in the beginning of the year as unemployment remained historically low, saying it shows “America’s economy is the strongest in the world,” in a statement Friday.
The commander in chief noted the remarkable milestones the job market has achieved: The unemployment rate has been below 4% for 24 straight months and the US economy has created nearly 15 million jobs since January 2021.
“It’s great news for working families that wages, wealth, and jobs are higher now than before the pandemic, and I won’t stop fighting to lower costs and build an economy from the middle out and bottom up,” Biden said. “I’ll continue to stand in the way of efforts by Congressional Republicans to enact massive tax giveaways for the wealthy and big corporations; cut Medicare, Medicaid, and Social Security; and raise costs for American families.”
But a new CNN poll conducted by SSRS reflects that Biden still isn’t getting credit for economic gains on his watch. 55% of Americans say they feel Biden’s policies have worsened economic conditions.
The unemployment rate hasn’t been this low for this long since Nixon was president
From CNN’s Matt Egan and Alicia Wallace
This job market keeps rewriting the history books.
The latest superlative: The unemployment rate has now stayed safely below 4% for two full years. The last time the unemployment rate was this low for this long, Richard Nixon was in the White House.
“The fact that the unemployment rate has been below 4% for 24 months straight for the first time since 1967 is truly remarkable,” Joe Brusuelas, chief economist and principal at RSM US, told CNN. “And that’s the word I keep saying as I look through this report: ‘This is remarkable.’ ‘Remarkable,’ is the takeaway here.”
More than a year ago, it seemed all but certain that the labor market would feel the effects of — and potentially be reeling from — the Federal Reserve’s aggressive rate-hiking campaign. But 11 hikes and four pauses later, the US job market is registering one of the longest periods of expansion this century.
The unemployment rate stayed below 4% for 27 months in a row, starting in November 1967 under President Lyndon B. Johnson through January 1970, according to federal data.
During Covid-19, the unemployment rate spiked to as high as 14.8% in April 2020 before falling rapidly.
Many economists expected the jobless rate would rise above 4% as the Federal Reserve spiked interest rates to fight inflation. As recently as last March, Fed officials projected the unemployment rate would be 4.5% in 2023.
Americans’ attitudes toward the economy continued to improve in January, thanks to slowing inflation
Americans continued to feel more upbeat about the economy this month, according to the University of Michigan’s latest consumer survey released Friday.
Consumer sentiment soared 13% in January, according to the university’s final reading, confirming what a preliminary estimate showed earlier this month. Sentiment reached its highest level since July 2021, “reflecting improvements in the outlook for both inflation and personal incomes.”
“After reserving judgment last fall about whether the slowdown in inflation would persist, consumers now feel assured that inflation will continue to soften,” Joanne Hsu, the university’s Surveys of Consumers director, said in a release. “Sentiment has resumed the upward trajectory from the all-time low measured in June of 2022, which had stalled in the late summer and fall of 2023.”
Indeed, inflation slowed markedly throughout 2023 as both economic growth and the job market remained on strong footing. It’s clear that inflation weighs heavily on US consumer sentiment. Sentiment reached a record low in June 2022, which was the same month that inflation reached a four-decade high.
Still, the university’s sentiment index remains well below pre-pandemic levels, but if inflation continues to cool further, then sentiment would likely follow suit, recovering further. The job market holding steady would also boost US consumer moods, since personal incomes were also a big reason why sentiment jumped in January.
Wall Street reacts to gangbusters jobs report
The US economy added a whopping 353,000 jobs in January, racing past economists’ expectations.
Here’s what Wall Street has to say:
- “The Fed’s ‘highly unlikely’ for March seems applicable. Whether the Fed goes in March or May, the pivot has happened and monetary policy will be wind at the sails of fixed income investors in this strong economic environment,” said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management.
- “Today’s jobs report calls into question the narrative of a soft landing for the economy. The January jobs report was pretty dramatic, implying there may be no landing. The economy is ripping ahead,” said David Donabedian, chief investment office at CIBC Private Wealth US.
- “On the basis of today’s jobs report, there is absolutely no sign of a softening labor market or weakening wage pressures. … Certainly, with this kind of number, the six or seven rate cuts that markets had been pricing in seems very offside,” said Seema Shah, chief global strategist at Principal Asset Management.
- “Just as many were caught off guard by the recession that never appeared in 2023, there’s always the possibility that another year will go by without a recession – and if that’s the case, it’s hard to see a new bear market starting without one,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
- “There was a lot of noise in the data, with potential for revisions lower. It keeps a bottom on interest rates for now but also doesn’t mean inflation is headed back up considering the recent productivity numbers. Longer term, stocks could be in a strong spot with accelerating economic growth supporting consumption and earnings,” said David Russell, global head of market strategy at TradeStation.
