Unemployment Claims Fell During Holiday Week
Wall Street Journal
The Facts
According to the "ADP National Employment" report — jointly developed between private company ADP and the Stanford Digital Economy Lab and released on Thursday — US private employment increased by 235K jobs last month.
Economists had expected a gain of approximately 150K. The news, alongside unemployment claims for the last week of December dropping to 204K from 223K, caused the S&P to open 1.2% lower as well as the Nasdaq to decrease by 1%.
The Spin
Narrative A
Markets already want to know when the Federal Reserve will start making cuts. While many have warned US inflation hasn't turned the corner yet, the markets are demanding change. With the ADP report potentially causing the Fed to raise interest rates even further, it's perhaps too early to be having such a discussion.
Narrative B
The Fed must stop raising interest rates. Domestic inflation is driven by profits rather than wages, which interest rates don't directly affect. Impacting workers rather than businesses, the government should use other means to tame inflation such as windfall profit taxes and antitrust enforcement.
Cynical narrative
Discussion of a healthy labor market and raising interest rates often neglects the deadly fingerprints of COVID. Fed Chair Jerome Powell himself correlated a tight job market to the pandemic deaths of nearly 500K American laborers. Factor in perhaps 4M long COVID sufferers, and the picture of just why the US job market is so "tight" has more context.
