The United States is undergoing an historic change in leadership and the nation has probably not been this divided in decades. The simmering tension between Democrats and Republicans on foreign policy is currently the most divisive item in the news. The uncertainties about economic and monetary policies also make it somewhat hard to predict how the financial markets will fare in the long term.
However, investors have been booking gains in equities and forex markets as some of Trump’s policies trigger bullish sentiments in the markets. Stocks have booked decent gains since news of Trump’s victory at the polls broke. The U.S. dollar is also becoming stronger against other rival currencies in the forex market. More interesting is the fact that U.S. employers are on a massive hiring spree – a move that suggests an optimistic economic outlook.
Talk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More
U.S. employers added 246,000 jobs in January
On Wednesday February 1, the ADP Research Institute in collaboration with Moody’s Analytics published its ADP National Employment Report for January 2017. The jobs report provides insight into employment trends in the private sector of the U.S. economy. The January ADP jobs report showed that private employers added an incredible 246,000 (see chart below) new positions in January. The job gains are impressive because they came up against the backdrop broad political and economic concerns in the country.
The impressive January ADP jobs reports shows the highest volume of job addition since June 2016 and the 246,000 jobs added in January marks a whopping 47.86% increase from the 151,000 jobs that were added in December 2016. Another interesting point to note is that the 246,000 private sector jobs added in January massively outperforms the consensus economists’ estimates for job growth in the U.S private sector.
The impressive job growth in the private sector is raising hopes that the public sector will go ahead to record decent job data. The consensus economists’ estimate on Fact Set holds that the Bureau of Labor Statistics will report a job growth of 175,000 in the public sector for January. Interestingly, Ted Wieseman, an economist at Morgan Stanley, has raised his forecast for the BLS employment numbers from 205,000 to 220,000.
What does the rest of the year hold for the labor market?
The massive job growth in the U.S. economy suggests that there’s an exciting world of opportunities in the labor market. One of the reasons behind the sharp uptrend in hiring data is that President Trump is vocal about the need to revitalize the U.S. manufacturing and goods-production sectors. His “America First” (though controversial) approach to keep jobs from moving overseas and bring jobs back is sending the right message to push optimistic sentiments in the labor market.
It is also important to note that an increase in hiring trends could also translate into higher pay for workers. When employees are hiring on all fronts and nobody is firing workers, employees tend to book bigger paychecks because employers will be forced to offer incentivized packages to attract workers. Hence, we can reasonably expect more income growth going forward.
Economists are optimistic that the new uptrend in hiring trends will accelerate growth in the labor sector to reduce the unemployment rate further. Ahu Yildirmaz, vice president and co-head of the ADP Research Institute notes that the U.S. labor market is hitting on all cylinders and we saw small and mid-sized businesses perform exceptionally well.”
Mark Zandi, chief economist at Moody’s Analytics, in the accompanying statement to the ADP jobs report observed that “2017 got off to a strong start in the job market. Job growth is solid across most industries and company sizes… Even the energy sector is adding to payrolls again.”