New York
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Data on job openings and labor turnover isn’t always a big market mover. But with stocks trading near record highs, markets are a little touchy.
Shares stumbled last week on news about job openings in December hitting their lowest level in five years as investors tried to assess the health of the economy and figure out whether to cash in on pricey stocks.
So with official jobs data due out on Wednesday, delayed by several days because of the brief partial government shutdown, analysts say stocks could go even lower on bad news — or even on news that looks too good.
The jobs number needs to be “Goldilocks,” Tom Essaye, president at market analysis firm Sevens Report Research, said in a note.
Not enough new jobs, or a loss in jobs, suggest an economy in trouble. But a large number of job gains might make Federal Reserve policymakers back off any further interest-rate cuts this year.
“Tomorrow’s number needs to stay Goldilocks and show positive job creation, but not so much it pushes rate-cut expectations further back,” Essaye said.
Data from the past week painted a picture of an economy on shaky ground. Consumer spending in December was weaker than expected, according to Commerce Department data. And last month was the worst January for hiring announcements since 2009, according to data from career services company Challenger, Gray & Christmas.
That’s putting extra weight on the monthly payrolls number. Economists’ consensus estimate is that the US economy added 75,000 jobs in January and that the jobless rate stayed at 4.4%, according to FactSet.
Healthy jobs growth could boost views that the US economy is resilient and has room to run this year. But bad economic news could be good news for stocks: A weakening job market in the fall led to the Fed cutting rates at three consecutive meetings last year, which supported the stock market rally. A weaker-than-expected report on Wednesday could raise investors’ hopes for more interest rate cuts.
“While a weak jobs market would be a negative for equities by itself, that will be offset by any increase in rate cut expectations, potentially underpinning the broader stock market as well,” John Canavan, lead analyst at Oxford Economics, said in an email.
However, it is a fine line. A weak jobs report could stoke nerves that the economy isn’t faring as well as investors thought, which could have negative implications for the stock market. Investors don’t want to inadvertently cheer on weakening job growth that could negatively impact consumer spending and economic growth, hurting stock prices.
“It would be refreshing for markets to embrace an environment where good news is good and bad news is bad,” Brent Kenwell, US investment analyst at eToro, said in a note.
