What's going on?
Data out Friday showed that the US economy added 266,000 jobs in November – beating investors’ expectations by 45% and capping off a very cheery week. Sheesh!
What does this mean?
Everyone expected the US to add more jobs in November than October, when numbers were driven down by a massive strike at General Motors. But almost no one expected things to be this good. What’s more, October’s numbers were revised up – the US actually added 28,000 more jobs than previously thought. All that’s brought the unemployment rate back down to 3.5%, its lowest in 50 years.
China also lifted tariffs on some US soybean and pork imports on Friday – indicating that a resolution to the trade war may be in store. Taken together, investors’ fears of an economic slowdown have been significantly assuaged: they duly sold off “safe-haven” investments like government bonds in favor of stocks.
Why should I care?
For markets: The Federal Reserve isn’t sold just yet.
November’s US employment data also revealed that wages grew 3.1% compared to 2018. That, combined with buoyant consumer sentiment, suggests that the US is in for a good holiday season: people have money, and they’re ready and willing to spend it (tweet this). For now, however, that hasn’t fed through to inflation – the US central bank’s other main concern. It’s therefore likely to keep interest rates steady when it meets later this month. If fatter wallets eventually lead to higher prices, however, a rate hike could be on the horizon.
For you personally: Uh-oh.
As wages creep up and unemployment falls, employers struggling to hire new people could turn elsewhere. While automation isn’t always cost-effective when wages are low, it might soon get more attractive for some. That could become a problem for those in easily automated jobs – although by improving productivity, it could also boost the economy overall.