Jobs Report Tomorrow
Tomorrow, May’s jobs report will release. I expect positive news. It’s weird, all I feel is positivity. QQQ is up 5% in the past month, SPY is up 3%, my portfolio is up 5%, and I feel like generally, people are fairly positive, which is why I was surprised to see that the Fear and Greed Index has been pointing downwards over the past month or so. Not only that, but the more I thought about it, the more I realized the market was fairly negative.
Ahead of this jobs report, stocks are in holding patterns, despite data from the past week, month, six months, showing that job growth is slowing, which will lead to a rate cut. Investors still are unsure about tomorrow’s report. Even though Europe’s Central Bank, just cut rates by 0.25 points.
However, I share none of this negativity. I am extremely, extremely optimistic about the jobs report tomorrow, and the chances of a rate cut by the end of the summer. Average hourly earnings are growing at a slower rate than before, more foreign-born workers are leading to a higher supply and lower demand, and people are quitting voluntarily at a lower rate than they were pre-pandemic. Those three points are crucial in my mind.
The hardest inflation to reverse is salary inflation, and if hourly workers are seeing their rates go up at a slower rate, it slows the whole economy. Second, more immigration and more immigrant workers are good for the economy. And I know that is relatively rich coming from a middle-class guy whose parents don’t work in a manufacturing job, or a low-skill job that would face competition from an immigrant, and I know that many people in their ivory towers on both sides of the political spectrum have boldly proclaimed that the more workers there are, the better, so we should encourage immigration, and I know that those whose jobs are replaced never see the benefits, but in this one instance, the higher number of immigrant workers is a positive sign for cutting rates. Beyond that, workers are quitting at lower rates, hopping from job to job at lower rates, and in general, are staying stationary.
These three factors show that less money is moving around than before. Tomorrow’s jobs report will be positive, but when The Fed meets on the eleventh and twelfth of June, they will not cut rates. The Fed is going to wait if humanly possible to finally close this out; because the worst-case scenario for The Fed is that they cut rates too soon and must double back, which, I think, is what the European Bank just did, to brush some recent economic troubles under the rug.
Do not pay feel jealous of the Europeans for their lower rate. Inflation ticked up .2% in May to 2.6%, and I feel sure, will be above 2.8% by the fall. And really, we should not be rushing to cut rates. The economy is in a pretty good spot overall, the dollar is strong, people are employed, etc. If we cut too soon, we are going to end up in a much worse spot. Overall, we’re doing great. It would be nice if The Fed cut by the end of the summer, but there is no need to hit the panic button if they don’t, or even if the jobs report is really hot tomorrow. We are in a great spot, stocks are doing well overall, you should be cooling your jets on a growing pile of money, and even if Jerome “I hate the ARK fund” Powell doesn’t cut rates, you will be fine.
