Latest / Markets with Megan: A Quick Financial Markets Update / December Job Surge and Impact on Markets | S2 E002 | 01-10-25

Transcript

December Job Surge and Impact on Markets | S2 E002 | 01-10-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Well, we got the final reading on the labor market for 2024, and boy was this a really good report for the economy.
• 0:08
  Megan Horneman: When we look at the change in payrolls in December of 2024, it came in much better than expected 256,000 versus an estimate of 165,000.
• 0:20
  Megan Horneman: It's Friday, January 10th, and we're here today to talk about the monthly employment report that we got, and this one really makes a big difference on what we can expect from the Federal Reserve in the month of January.
• 0:32
  Megan Horneman: So let's just delve into some of these details.
• 0:34
  Megan Horneman: So, as I mentioned, 256 versus 165, it was the best monthly creation in jobs since March.
• 0:42
  Megan Horneman: And then when you look at the hourly earnings, they were up three-tenths of a percent for the month.
• 0:47
  Megan Horneman: So, as expected, that did bring the year-over-year average hourly earnings rate down slightly, down a tenth to 3.9%.
• 0:55
  Megan Horneman: Still solid.
• 0:57
  Megan Horneman: Still that sticky wage inflation the Fed keeps trying to fight, but again a little bit better than expected.
• 1:03
  Megan Horneman: The jobs that were created were primarily led by trade and transportation, private education and healthcare, as well as the leisure and hospitality side.
• 1:12
  Megan Horneman: So we still do see appetite from the leisure and hospitality side, from the consumer, so that continues to grow there.
• 1:20
  Megan Horneman: The one area that we like to follow, which was showing a lot of weakness in 2024, was temporary help, and we've actually now seen two consecutive months that that has increased.
• 1:30
  Megan Horneman: That means that businesses continue to have the need for short-term workers, so that's a strong reading there for the labor market.
• 1:40
  Megan Horneman: Now we also got the annual revisions for the entire year and here's the one important takeaway from this.
• 1:45
  Megan Horneman: The peak in the unemployment rate was originally thought to be at 4.3% in July.
• 1:51
  Megan Horneman: That resulted in the Fed coming in with that aggressive rate cut in September 50 basis points.
• 1:56
  Megan Horneman: But now that we have the annual revisions, it actually wasn't that high.
• 2:00
  Megan Horneman: It only rose to 4.2.
• 2:01
  Megan Horneman: Again, it's only a tenth of a difference.
• 2:04
  Megan Horneman: But did that tenth mean 50 basis points versus 25 basis points?
• 2:08
  Megan Horneman: And is the Fed now stuck in that pickle where they're fighting inflation and they've been easing monetary policy into a strong labor market and stubborn inflation?
• 2:19
  Megan Horneman: Now, obviously you can see the markets didn't like this, neither bonds or stocks.
• 2:23
  Megan Horneman: We're seeing interest rates rise across all maturities.
• 2:26
  Megan Horneman: Specifically, that 30-year bond now has crossed above 5%.
• 2:31
  Megan Horneman: This isn't good news for the housing market.
• 2:34
  Megan Horneman: It is not good news for mortgage rates.
• 2:35
  Megan Horneman: We'll see them continue to tick higher.
• 2:37
  Megan Horneman: The equity market is down significantly.
• 2:40
  Megan Horneman: We're looking at it being down across the board.
• 2:42
  Megan Horneman: When you look at the S&P 500, the sectors that are leading it lower are some of those interest rate sensitive sectors, so real estate being one.
• 2:50
  Megan Horneman: Financials and then also infotech.
• 2:53
  Megan Horneman: We've often talked about the high valuations that are being priced into the tech side of the market.
• 2:58
  Megan Horneman: That's not pricing in the concern that we might have higher interest rates for longer.
• 3:03
  Megan Horneman: So we're seeing those areas of the market take a hit as well.
• 3:06
  Megan Horneman: And that's all we have today.
• 3:08
  Megan Horneman: We'll be back next week with some more economic information.
• 3:11
  Megan Horneman: There still are a couple key inflation readings that we'll get before the Fed does meet to make the changes in January, but I think it's safe to say that they won't be making any adjustments to interest rates in January.
• 3:22
  Megan Horneman: Thank you, and if you like this podcast, please hit that subscribe button, hit the alarm bell.
• 3:28
  Megan Horneman: If you have any comments, you can post them on to podcast@verdance.
• 3:31
  Megan Horneman: com, and if you'd like a history of these podcasts Markets with Megan you can go marketswithmegan.
• 3:37
  Megan Horneman: fm.
• 3:38
  Megan Horneman: Thank you.