What's going on?
Please, no more free time: fresh data out on Friday showed the US economy only added a worse-than-expected 49,000 new jobs in January (tweet this).
What does this mean?
So let’s start with the monthly report’s good news: the unemployment rate fell to 6.3%, below economists’ 6.7% estimate. Now for the bad: that was mostly down to a drop in the proportion of people who are either working or actively looking for a job – i.e. the “participation rate”.
There were job losses too, particularly in the hospitality and retail industries given the end of the holiday season and winding down of retail mania. That seasonal swing usually makes January a tricky month when it comes to interpreting jobs data, but revisions to previous reports – which saw almost 160,000 jobs cut from the last two months’ totals – left little doubt about it: the US economy is in freefall.
Why should I care?
For you personally: Prepare to spend your stimulus check.
Employment reports give an almost real-time temperature check on how the “real economy” is doing, and last week’s frosty update suggests America is in need of a hot cup of Joe. And that’s exactly what it’s getting: the US president’s $1.9 trillion spending plan took a big step forward last week, and a direct cash payment will probably warm the cockles of your heart before much more damage is done.
The bigger picture: The future is bright(ish).
Investors, for their part, seemed to shrug off the jobs report: they continued to buy up US stocks and drove the S&P 500’s best week since November. That might be because they’re looking past the immediate disruption, and instead focusing on a time when enough Americans are vaccinated against coronavirus. That probably won’t be until the end of this year, mind you, and impatient investors won’t take kindly to any delays.