Still Too Warm

Mike Zaccardi

I’M 34 GOING ON 74. Like an old man set in his ways, I routinely prepare my own meals and rarely go out to eat. But last week, I shook things up by scarfing down some ribs at a nearby outdoor mall. I couldn’t help but notice all of the “now hiring” signs.

It’s a far cry from when I ventured to the same mall in March and April 2020. Do you remember that feeling—the uncertainty and anxiety about what life was going to look like amid the height of the pandemic? I recall walking around feeling like I was on a different planet. Storefronts were shuttered. Few souls were in view on what was usually a busy Friday evening.

Fast forward two-and-a-half years. Last week, we received fresh snapshots showing how tight the labor market is—at least aside from the tech sector. Tuesday featured a surprising jump in the number of job openings from 10.3 million at the end of August to 10.7 million in September, according to the Job Openings and Labor Turnover Survey (JOLTS). Economists expected just 9.8 million vacant positions. That’s an indication of not enough labor supply, which further pressures the Federal Reserve to keep up its aggressive rate-hiking. Short-term interest rates spiked when the strong JOLTS report hit the tape.

Soft employment readings then came from two broad economic activity reports. The ISM Manufacturing and ISM Services Employment subindexes revealed a mixed picture. The manufacturing sector’s job market was stronger than forecast, while the services sector showed modest labor market contraction last month.

Finally, the big October jobs report was released Friday morning. The 261,000 jobs created were above analysts’ expectations, but the unemployment rate ticked up. Overall, I’d call it a “warm” report—not quite as hot as some other big monthly job gains we’ve seen lately.

Unfortunately for employees, average hourly earnings climbed just 4.7% from a year ago, well below the current 8.2% headline Consumer Price Index (CPI) inflation rate. On Thursday—after the midterms—the October CPI report will cross the wires. The consensus forecast calls for a slight downtick to an 8% 12-month increase.

How did financial markets react to last week’s news? U.S. stocks fell, as did the bond market. But foreign shares had their best week relative to the U.S. market since 2008. My hunch: After the midterm elections and October’s inflation report have passed, uncertainty among investors will subside—and with it market volatility.

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