February 6, 2023

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Strong labor market data in the US puts the Fed in a tight spot

Investors grab every glimmer of hope to pretend that skyrocketing inflation is no longer a problem. But Friday’s data on the U.S. labor market did little to support the pessimism in stock markets.

The U.S. added 263,000 jobs in November, more than the 200,000 economists had expected on average. That changed on Friday. Hourly wages rose 5.1 percent on a year-over-year basis, well above analysts’ target of 4.6 percent.

A continued strong labor market and rising wages may ensure that high inflation remains a serious problem in the United States. It also means that the US Federal Reserve will have to continue to intervene strongly to structurally reduce inflation.

Federal Reserve Chairman Jerome Powell He gave it on Wednesday The policy rate in the US is set to be raised in small steps from December. Investors seized on Powell’s speech and speculated on less aggressive monetary policy, sending stock markets sharply higher.

Still, Friday’s labor market data leaves little room for the U.S. central bank to slow down. On Wall Street, major stock indices suffered losses. The Dow Jones Industrial Average fell 0.8 percent and the S&P 500 index lost 1 percent after Friday’s open.

read more: Stock Market in 2023: Count on Volatility… and a Cautious Recovery, Say Equity Strategists at 3 Major Asset Managers


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