Jerome Powell.
The labor market has signaled to him that it is strong enough to absorb the interest rate increase without creating unemployment (Photo: GettyImages, Drew Angerer)
The US labor market stunned analysts
Half a million, or more precisely 517 thousand new jobs, is the figure that stunned the analysts in the United States, upon entering the weekend.
The employment report was expected to be positive, with the general estimate hovering around an addition of 1,800 new jobs, only that the Sui figure was almost 3 times higher - and what's more: it reflected an addition of 4.8 million new jobs in the American economy during 2022.
The unemployment rate in the US, therefore , stands at 3.4%, i.e. - better numbers than before the corona crisis. Even the average salary increased by 4.4%, although less than the rate of inflation (6.5%), but still allows most workers to reasonably cope with expenses without being dramatically reduced.
So what's going on here?
We'll try to explain, but first a few words about Wall Street.
The US capital market was one of the signs of an approaching global recession, the Nasdaq for example, with declines of about 33% during 2022 painted the screens red and the economic horizon black.
However, since the beginning of the year and despite the continued increase in interest rates by the central bank, the Nasdaq has already corrected almost half of the losses of 2022 as a whole, an amazing figure considering the fact that the quarterly reports of the high-tech giants were bad.
If you were expecting "The Wolf of Wall Street"-style broker celebrations, you are welcome to moderate your expectations : On Wall Street, of course, they are satisfied with the increases and the forecasts that are getting clearer, but they also fear two main things: the first is that the signal from the labor market to the governor, Jerome Powell, according to which he is able to absorb the sharp interest rate increases without causing alarming unemployment rates, will actually push the governor to raise the interest rate even more Until the inflation is lowered to the target of 2%, that is - the capital market will continue to bleed.
The second figure is almost more spiritual than economic: on Wall Street they hate losses, but they hate uncertainty even more: if the analysts failed to predict the changes that will pass through the market, is it possible that the models they use in their calculations are no longer effective?
Imagine an election system for the Knesset, in which the largest party receives almost 3 times as many seats as the polls predicted.
All the polls all - wouldn't you conclude that something in the predictive model is missing the mark?
Nasdaq erased a large part of the 2022 losses, despite disappointing reports from the tech giants (Photo: ShutterStock)
How do you explain the gap between the predictions and the real data?
With the help of the magic word with which we tend to interpret almost every new phenomenon in our lives: the corona virus.
The prevailing assumption now is that the year 2022 met the mark of the year and a half that preceded it: millions of young Americans who dropped out of the labor market benefited from diminishing government support.
For a certain period of time they still sat on the fence, usually on that of the parents' house (not a common phenomenon in the US as it is in Israel and some European countries) - and then jumped back into the labor market.
Despite the need of many young people for income, and even more so - despite waves of layoffs of tens of thousands of employees in a large part of the large tech companies, the labor market remains an "employee's market": meaning, the competition for the heart of the available employee is still great, many employees demand relief in the work-from-home style to which they were accustomed during the Corona and the employers, who expected to see the employees fighting for every Vacant position, forced to compromise.
The response of economists in the US to the labor market data is, therefore, mixed: on the one hand, there is no disputing that this is good news, which, with due caution, indicates that the great recession feared by many around the world is not so great, after all - and it is quite possible that growth, already in -2023, will hit the pessimistic forecasts.
On the other hand, many look at the data and scratch their heads in confusion: Has the global economy changed that much following the closures that accompanied the corona epidemic? The change embraces almost all the aspects through which it was customary to examine the economy: from employment to consumer behavior Bottom line: The news from the US is good, but it can also be confusing.
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Jerome Powell
