Saturday, February 3, 2024

US employment accelerates

January payrolls data showed an acceleration in employment in the USA.  This is consistent with the rebound in the ISM & PMI surveys.

From the Fed's perspective, this means they can wait before cutting rates.  If employment growth had slowed, or gone negative, they would have felt the need to start cutting the Fed Funds rate soon, especially as inflation is still declining.  They can be more cautious now.

From the Democratic Party's perspective, this is good news.  Incumbents tend to win elections if economic conditions are improving.  If this continues for the next few months, and ignoring all the other factors, Biden's re-election chances have improved.

From the point of view of the share market, these data mean that optimism about rate cuts should lessen, while profits forecasts should improve.   Net balance:  the market should continue to trend upwards for the next couple of months, if more slowly.

From an ordinary worker's perspective, this is excellent news, especially since wage growth ticked up a little.

Once again, never underestimate the economic benefits of government spending initiatives.



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