The U.S. economy has gotten a double dose of good news as 2019 gets underway.
Non-farm payrolls had their biggest gain in 10 months, almost doubling forecasters’ expectations. But that’s not all. The October and November totals were also revised up by 58,000. Manufacturing jobs had their biggest gain in 12 months and best year since 1997. Wage growth matched its fastest pace in a decade.
In another sign of greater confidence in the labor market, the number of people leaving jobs was the highest since 1992. The government data for December followed similarly strong private-sector payrolls report from ADP on yesterday.
This week’s news matches the trend of America re-industrializing and re-hiring after major cost cuts last decade. Ironically, it comes at the same time big companies are struggling to grow profits. We’ll look more deeply into this disconnect as earnings come out over the next month.
The other big positive today? Dovish comments from the Federal Reserve.
“There is no preset path for policy,” Fed Chair Jerome Powell said at a forum in Atlanta. That indicates he may wait to raise interest rates — a big change from his hike-at-all-costs stance barely three months ago.
These two stories are potentially huge because they remove a major bearish narrative that plagued sentiment in late 2018. At that time, strategists worried about the central bank raising rates in the face of slowing growth. But, as cited on Market Insights at the time, economic data never confirmed those fears.
In conclusion, the market still faces risks of a trade war with China and a government shutdown. But some key economic factors — jobs and interest rates — seem to favor the bulls.