Weekly Market & Economic Recap (Week of January 23, 2023)

• Companies’ hiring plans suggest that the economy remains robust for now. Total labour supply (people who have or are seeking jobs) is roughly back to pre-pandemic levels. By contrast, labour demand (filled plus open jobs) has increased by 3m positions. The excess demand represents about 3% of all those employed, which has contributed to big nominal wage gains. Slower gdp growth—whether a recession or not—will help restore balance. (The Economist, January 24, 2023, https://www.economist.com/graphic-detail/2023/01/24/where-have-all-americas-workers-gone)

• Jobless claims declined last week, suggesting the overall labor market remains tight as several large employers announce job cuts. Initial jobless claims, a proxy for layoffs, fell by 6,000 to a seasonally adjusted 186,000 last week, the Labor Department said Thursday. The four-week moving average of weekly claims, which smooths out volatility, was 197,500. Claims are up from lows reached early in 2022, but have remained near prepandemic levels. (Wall Street Journal, January 26, 2023, https://www.wsj.com/articles/jobless-claims-fell-last-week-pointing-to-tight-labor-market-11674741049?mod=economy_more_pos2)

• The U.S. economy grew at a solid 2.9% annual rate last quarter but entered this year with less momentum as rising interest rates and still-high inflation weighed on demand. U.S. growth in the fourth quarter was down slightly from a 3.2% annual rate in the third quarter, the Commerce Department said Thursday. Consumer spending helped drive the fourth-quarter gain, while the housing market weakened and businesses cut back their spending on equipment. (Wall Street Journal, January 26, 2023, https://www.wsj.com/articles/us-gdp-economic-growth-fourth-quarter-2022-11674683034?mod=economy_more_pos1)

• Bond traders nudged their expectations for US inflation higher this week as US stocks advanced, signifying increased confidence in a soft landing for the economy after seven Federal Reserve rate increases. (Bloomberg, January 27, 2023, https://www.bloomberg.com/news/articles/2023-01-27/us-inflation-expectations-stabilize-as-fed-pause-comes-into-view)

• Apple Inc., AAPL 1.37%increase; green up pointing triangle Amazon AMZN 3.04%increase; green up pointing triangle.com Inc., Meta Platforms Inc. META 3.01%increase; green up pointing triangle and Alphabet Inc. GOOG 1.56%increase; green up pointing triangle report earnings in the coming week, four of the many companies providing quarterly updates as layoffs and slowing growth hit the tech industry. (Wall Street Journal, January 28, 2023, https://www.wsj.com/articles/apple-amazon-meta-alphabet-tech-earnings-11674859156?mod=markets_lead_pos4)

• US manufacturing showed more signs this week of succumbing to the Federal Reserve’s aggressive interest-rate hikes that are taking a bigger bite out of demand and risk upending the economic expansion. (Bloomberg, January 28, 2023, https://www.bloomberg.com/news/articles/2023-01-28/woes-mount-for-ailing-us-manufacturers-as-orders-investment-weaken?srnd=economics-v2)

• Pension Funds in Historic Surplus Eye $1 Trillion of Bond-Buying. Corporate plans ending years of shortfalls want to derisk. Funding ratio at biggest US pension plans surges to 110%. (Bloomberg, January 28, 2023, https://www.bloomberg.com/news/articles/2023-01-28/pension-funds-with-a-historic-surplus-eye-1-trillion-of-bond-buying?fromMostRead=true)

• Stock-market investors are looking to earnings next week from Apple Inc., Amazon.com Inc. and Meta Platforms Inc. for signs of whether Wall Street’s projections are too optimistic as the US economy cools. But as signs of a slowdown mount, there’s a silver lining: Battered by last year’s bear market and long focused on the risk of a potential recession ahead, the stock market is rewarding companies that exceed expectations and dialing back the punishment of those that fall short. (Bloomberg, January 28, 2023, https://www.bloomberg.com/news/articles/2023-01-28/stock-market-vigilantes-dial-back-penalties-for-earnings-misses?srnd=markets-vp)

• ECB Rate-Hike Week May Feature Slowing Inflation, Stalling GDP. Consumer-price growth is predicted to have slowed this month. Euro-zone GDP splits economists over possible contraction. (Bloomberg, January 27, 2023, https://www.bloomberg.com/news/articles/2023-01-27/ecb-latest-inflation-may-slow-and-economy-stall-before-rate-hike?srnd=economics-indicators)

• China’s State Council said the nation needs to accelerate a recovery in consumption and make it the main driving force of the economy, as the world’s second-largest economy emerges from three years of stringent Covid controls. (Bloomberg, January 28, 2023, https://www.bloomberg.com/news/articles/2023-01-28/china-state-council-pledges-to-boost-consumption-to-aid-recovery?srnd=economics-v2)