June 3, 2022, 11:45 am EDT
Strong Jobs Report, Weak Market Action
Why do the strong non-farm jobs report in May result in a weak market reaction? It is important to understand the difference between the numbers and their outcome for the future.
Numbers are very strong for the May non-farm jobs report:
- 390,000 new jobs
- Unemployment rate at 3.6% near 50 years low
- Average hourly earnings rose 5.2% from a year ago
- Leisure and hospitality (restaurants, bars, cruises, gambling, hotels) gained 84,000 jobs as the leading category
There are no problems with these numbers themself. But there are three main concerns to consider
- Worse inflation and longer rate hikes
- This could mean the top-out of the job market instead of strong signals for the future
- Retailers and technology companies prepare for a hiring freeze, and layoffs, not to add headcount
Indeed, Tesla (TSLA) is down -8% today as soon as the announcement of a 10% reduction in the workforce.
In summary, it reflects the reality very well that the stock markets cannot climb up further under inflation, high valuation, high debt, and higher rates. Strong economic data does not alter the direction.
