Last Week’s Markets in Review: Labor Market Remains Resilient as 2024 Begins

Global equity markets finished lower for the week. In the U.S., the S&P 500 Index closed the Week at a level of 4,697, representing a decrease of -1.78%, while the Russell Midcap Index moved -2.19% last Week. Meanwhile, the Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, returned -5.19% over the Week. As developed international equity performance and emerging markets were lower, returning -1.48% and -2.09%, respectively. Finally, the 10-year U.S. Treasury yield moved higher, closing the Week at 4.05%.

The holiday-shortened trading week was full of economic data concerning the employment segment of the domestic economy. As we have stated throughout the prior year, the resilience of the labor market remains an important ingredient in determining the future actions of the Federal Reserve concerning monetary policy. Employment data released during the Week included the November Job Openings and Labor Turnover Survey (JOLTS), the ADP Employment Report, Weekly Jobless Claims, and the December Employment Situation Report.

Job Openings and Labor Turnover Survey (JOLTS) for November was released by the Labor Department last Wednesday. Employment listings moved slightly lower to 8.79 million from 8.85 million in the prior month, roughly in line with the consensus estimate for 8.8 million. Openings fell by 62,000, though the rate of vacancies as a measure of employment was unchanged at 5.3%. The ratio of job openings to available workers fell to 1.4/1, still elevated but down sharply from the 2/1 level seen in 2022.

Thursday saw the release of the December ADP National Employment report and the Weekly Jobless Claims for the Week ended December 30th. ADP reported that private sector employment increased by 164,000 jobs in December, and annual pay was up 5.4% year-over-year. The 164,000 jobs were higher than the prior month (101,000) and the estimate (115,000). New applications for U.S. unemployment benefits also fell in the last week of the year as initial claims decreased to 202,000, lower than the 216,000 estimate and the 218,000 reported in the prior week.

The most important reading of the labor market came on Friday with the release of the December Employment Situation Report by the Bureau of Labor Statistics (BLS). December’s report showed that employers added 216,000 jobs while the unemployment rate stayed at 3.7%. The consensus estimate projected an increase of 170,000 and an unemployment rate of 3.8%. The hiring boost came from a gain of 52,000 in government jobs and another 38,000 in healthcare-related fields. Average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, higher than the respective estimates of 0.3% and 3.9%.

With the Federal Reserve projecting that the economy will slow in 2024 to 1.4% real GDP growth and stay below 2% through 2026, the question becomes how much longer the labor market can stay as resilient as these figures appear to show.

Best wishes for the week ahead!

JOLTS and Weekly Claims data is sourced from The Labor Department. ADP Employment Report is sourced from ADP. The Employment situation Report is sourced from The Bureau of Labor Statistics. Economic Calendar Data from Econoday as of 1/8/24. International developed markets are measured by the MSCI EAFE Index, emerging markets are measured by the MSCI EM Index, and U.S. Large Caps are defined by the S&P 500 Index. Sector performance is measured using the GICS methodology.

Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and Walsh cannot guarantee the accuracy of said information and cannot be held liable. You cannot invest directly in an index. Diversification can help mitigate the risk and volatility in your portfolio but does not ensure a profit or guarantee against a loss.