If the U.S. economy is going to tip into a recession this year, it's going to have to overcome the strong labor market first. Private employers added 235,000 jobs to the economy in December according to payroll provider ADP, a figure that soared past economist expectations of 153,000.
The private payrolls numbers come just a day before the Labor Department is set to release its December jobs report, which will show if unemployment has risen amid the Federal Reserve's attempts to slow down the U.S. economy. Economists anticipate unemployment will remain unchanged at 3.7%.
The jobs figures will be closely watched as an indicator of whether the economy is headed toward a recession. While multiple economic indicators are used to determine whether the economy is in a downturn, unemployment is one key determinant.
In another sign of the labor market's resilience, first-time unemployment claims figures released this morning also came in lower than economists expected. The Labor Department reported jobless claims fell by 19,000 to 204,000 in the latest week ended Dec. 31, compared to projections of 223,000.
The strength of the labor market is important, as it raises the likelihood that the Federal Reserve will remain aggressive going forward in its inflation fight, but if the Fed tightens policy too quickly, it could tip the economy into a recession.
The central bank has previously pointed to the job market as a sign that the U.S. is capable of withstanding higher and higher interest rates, which are designed to slam the brakes on the economy. But although higher rates will ease inflation, the policy brings other economic pains. If you've tried to buy a house, a car, or hold any credit card debt, you've no doubt felt the sting as borrowing money becomes harder and more expensive.
So with the latest data showing that the labor market is going strong, stocks are sinking today as investors take today's "good news as bad news." As the thinking goes, if the job market is strong, the Fed could hit us with another painful rate hike at the end of the month, when it next meets to decide rate policy.
- Kristin
0 comments:
Post a Comment