A scorching start for U.S. jobs growth

A “Now Hiring” sign at Jamba Juice in San Francisco, California, US, on Monday, June 26, 2023.

David Paul Morris | Bloomberg | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

China ticks up
China stocks reversed losses
on Monday while the rest of the region was mostly down as investors digested the latest comments from U.S. Federal Reserve Chairman Jerome Powell. Hong Kong’s Hang Seng index was up, while mainland China’s CSI 300 spiked 1.68%. Wall Street closed higher Friday, with the S&P 500 hitting a fresh high, boosted by earnings from mega tech firms and a strong January jobs report. Both the blue-chip Dow and the Nasdaq Composite also gained.

Powell’s cautious tone
Federal Reserve Chair Jerome Powell said in a “60 Minutes” interview aired Sunday that the U.S. central bank will proceed carefully with interest rate cuts this year. “We just want some more confidence before we take that very important step of beginning to cut interest rates,” he said.

Gold, silver advance
Gold and silver could rise further this year on hopes that the U.S. Federal Reserve will lower interest rates, said UBS. “We are expecting gold to be pushed higher by a Fed easing,” noted the investment bank’s precious metals strategist. “Also, this comes with a weaker dollar,” said Joni Teves, adding gold will likely hit $2,200 per ounce in 2024.

U.S. bipartisan proposal
Senators have released details of a $118.2 billion bipartisan aid proposal for Ukraine, Israel and the southern U.S. border, after months of closed-door negotiations. House Republicans who proposed their own Israel-only funding package over the weekend will likely oppose the bill.

[Pro] Citi’s top global picks
Citi highlighted its list of “high-conviction” stock picks across global markets. “We identify catalysts that will trigger outperformance and chose liquid names in which investors can build positions,” Citi said, giving one over 50% upside.

The bottom line

U.S. jobs growth started the year firing on all cylinders.

January’s report out on Friday was a blowout. It indicated remarkable strength of the labor market, which bodes well for the broader economy.

Employers added 353,000 jobs for the month, defying economists’ forecasts. The unemployment rate held steady at 3.7%, against the estimate for 3.8%. What’s more, both November and December data were revised up.

There was more good news on the wage front, which came in strong, up 4.5% last month from a year earlier. Average hourly earnings also increased 0.6%, double the monthly estimate. 

The White House seized on the solid data for a quick victory lap, unsurprisingly.

“America’s economy is the strongest in the world. Today, we saw more proof…” President Joe Biden said in a statement. 

“Our economy has created 14.8 million jobs since I took office, unemployment has been under 4% for two full years now, and inflation has been at the pre-pandemic level of 2% over the last half year,” he added. 

Yet, the job market’s surprising resilience throws a wrench into the Fed’s plans to lower interest rates. 

Last week, Fed Chair Jerome Powell essentially ruled out a March rate cut, citing a need for more evidence that inflation was firmly under control.

A scorching jobs report will likely fuel the Fed’s thinking to further delay rate cuts for this year. This means, investors may need to readjust their expectations. 

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