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Market Anticipates Key Jobs Report: What to Watch For

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Anticipating Friday's Jobs Report: Implications for the Economy

As the economy is expected to slow down, all eyes are on Friday's jobs report, which is anticipated to reveal an increase in hiring by employers in November. While a growing economy is generally positive, the report could have implications for investor confidence and the Federal Reserve's interest rate policies.

Payroll Growth and Unemployment Rate

Economists surveyed by Dow Jones predict that nonfarm payrolls expanded by 190,000 last month, up from 150,000 in October. Although payroll growth has averaged 204,000 over the past three months, it falls short of the 342,000 level seen during the same period in 2022. Despite this, the unemployment rate has only risen by 0.2 percentage points over the past 12 months, reaching 3.9%. While elevated from earlier in the year, this rate still reflects a robust economy.

Wage Growth and Inflation

One crucial aspect to watch in the report is wage growth. Average hourly earnings are expected to show a 0.3% acceleration from October and a 4% increase over the 12-month period. The yearly average hourly earnings level does not align with the Federal Reserve's 2% inflation goal, but it has come down from its peak in March 2022. Achieving sustainable wage growth is vital for curbing inflation, and any significant changes could impact the market.

Unemployment Rate and Recession Indicators

While the headline unemployment rate may receive extra scrutiny, it is important to note that it has only risen incrementally from a year ago. However, it has increased by half a percentage point from its recent low of 3.4% in April. According to the Sahm Rule, a rise of half a point in the unemployment rate from its most recent low on a three-month average indicates an economy in recession. Economist Claudia Sahm, the rule's author, acknowledges warning signs but does not guarantee a recession this time.

Other Labor Market Indicators

Additional labor market data this week has shown some instability. Job openings have hit a 2 1/2-year low, and private payrolls have grown only incrementally, as reported by ADP. Although continuing jobless claims have slightly decreased, they remain high. However, the return of workers from strikes in the auto industry and Hollywood could significantly boost the November total, potentially exceeding Wall Street estimates and influencing the Federal Reserve's stance. In conclusion, Friday's jobs report holds significant implications for the economy, investor confidence, and the Federal Reserve's decision-making. While certain sectors experience a slowdown, others, such as healthcare, remain robust. As businesses cautiously navigate the current landscape, the report will provide valuable insights into the labor market's trajectory and potential impacts on future economic conditions.

Friday's Jobs Report: Potential Impact on New Business Formation

As the economy braces for an anticipated slowdown, the upcoming jobs report could significantly influence the landscape for new business formation. The report is expected to show increased hiring in November, a positive sign for the economy. However, its implications could extend beyond surface-level observations.

Payroll Growth: A Double-Edged Sword

The predicted expansion of nonfarm payrolls, coupled with a relatively stable unemployment rate, paints a picture of a robust economy. However, for new businesses, this could mean a more competitive landscape for talent acquisition. The challenge of attracting skilled employees in a market where job opportunities are abundant could increase operational costs for startups.

Wage Growth and Inflation: A Balancing Act

The anticipated acceleration in average hourly earnings could have a dual impact on new businesses. On one hand, increased wages could boost consumer spending, benefiting businesses. On the other hand, it could exacerbate inflation, increasing the cost of goods and services, and potentially squeezing profit margins for new businesses.

Recession Indicators: A Cautionary Tale

The Sahm Rule's indication of a potential recession, based on the rise in the unemployment rate, could serve as a warning for new businesses. While the rule's author does not guarantee a recession, the possibility should prompt new businesses to adopt a cautious approach, with contingency plans in place. In essence, the jobs report will provide valuable insights into the labor market's trajectory and its potential impacts on future economic conditions. For new businesses, these insights could guide strategic planning and risk management, helping them navigate the uncertain economic landscape.
Story First Published at: https://www.cnbc.com/2023/12/07/heres-what-the-market-will-be-looking-for-in-fridays-key-jobs-report.html
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