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3 Takeaways From the November Jobs Report


  • The November jobs report came in stronger than expected.
  • Treasury yields and the U.S. dollar rose today while stocks fell.
  • The market’s reaction to the jobs report suggests that any positive news will be viewed as negative by financial traders.
jobs report - 3 Takeaways From the November Jobs Report

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The Labor Department just released its November jobs report this morning, and stock traders aren’t pleased with the data. You might assume that what’s good for the economy should be good for the financial markets. However, the usual rules don’t necessarily apply as a strong jobs report could prompt more aggressive interest rate raises.

First, let’s take a glance at the Labor Department’s need-to-know data points. The U.S. unemployment rate for the month of November was 3.7%. That’s in-line with what economists had expected.

So far, there’s nothing particularly notable here. Here’s where it gets interesting, though. In November, U.S. nonfarm payrolls increased by 263,000, versus economists’ forecast of 200,000. In other words, a lot more people are working and getting paid than the experts had anticpated.

Additionally, average hourly earnings increased 0.6%, while economists only thought the increase would be 0.3%. Hence, not only are plenty of Americans working, but they’re also getting paid more than expected.

What the Jobs Report Means for Investors: 3 Takeaways

One thing that investors can take away from the November jobs report is that, until further notice, good news is bad news. By that, I mean financial traders will sell stocks, but also bid up the U.S. dollar and bond yields, whenever there’s positive news for the nation’s economy.

That’s because, in order to tamp down inflation, the Federal Reserve is hiking interest rates on government bonds. Stock traders don’t like high bond yields, so they want to see the Federal Reserve slow down its pace of rate hikes — but the Fed won’t likely back down until it sees signs of a cooling economy.

This leads to the second takeaway, which is that technology stocks are particularly vulnerable now. For instance, Intel (NASDAQ:INTC) was down significantly this morning in response to the jobs report.

The reason for this response is because 2021’s high flyers are susceptible to steep declines when the Fed tightens its monetary policy. Among last year’s strongest performers are tech stocks, so they could continue to decline over the coming weeks.

Finally, investors should consider that diversification is essential during times of monetary-policy tightening. For instance, Walmart (NYSE:WMT) stock didn’t decline much, compared to shares of many technology stocks.

Walmart is an all-weather business that can withstand monetary-policy tightening. This helps to explain why WMT stock is holding up relatively well today. Hence, it might make sense for investors to consider allocating away from more cyclical, interest-rate-reactive stocks and into less volatile assets for a while.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Article printed from InvestorPlace Media, https://investorplace.com/2022/12/3-takeaways-from-the-november-jobs-report/.

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