Mike Giordano, CFP®

The latest government jobs report presented a tale of two stories. The economy added 272,000 jobs last month, better than economists’ expectations. The economy also lost 408,000 jobs last month and the unemployment rate ticked up a notch to 4%. So, which is it?

The monthly jobs report is generally considered the most important piece of economic data each month. After all, jobs dictate spending and consumer spending is what drives the U.S. economy.

Under the hood, the report has two components, a survey of businesses and a survey of households. The business survey determines what’s considered the headline jobs number–in this case 272,000 more jobs. But, that number only includes employees, not self-employed individuals, which may be one reason for the discrepancy.

Another reason could be part-time workers. A person with multiple jobs is counted multiple times in the business survey, but only once in the household survey.

To be sure, this was a noisy piece of data on what has been a highway filled with economic noise post-Covid. Some aspects confirm the cooling data we’ve seen in recent weeks. But, the headline jobs number argues for a continuing of the robust economy that’s persisted in the face of higher rates.

As for the markets, it feels as though they no longer care about rate cuts as long as earnings growth holds up. Corporate profits for the S&P 500 are expected to grow 11% this year and about 14% next year. That’s roughly double the long-term trend. It’s pretty remarkable given the pressure higher interest rates are supposed to have on the economy. Maybe, today’s rates still aren’t restrictive enough.

If lower rates were necessary for the markets to plow higher, each time the market reduces expectations for cuts, the market should conceivably take a leg lower. But, that’s not been the case all year. We’ve gone from pricing in six rate cuts in 2024 down to just one. So, I’d make the case, the market’s strength continues because growth expectations remain strong.

To bring this full circle: consumers have held up because jobs have held up. That’s held up forecasts for earnings and lifted up the stock market to today’s record highs.

These are all factors we’re looking at when building portfolios. If you’re wondering the current economic set up means for your investments, reach out.

Another big week of news coming up: On Wednesday, we’ve got the CPI inflation report plus the Fed’s latest commentary on the path for interest rates. We’ll be watching…

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