Virtue Signaling


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What’s going on?

Data out on Friday showed that the US added way more jobs than expected last month, and aren’t you going to hear about it…

What does this mean?

The US was past the worst of Omicron last month, which helped companies really get down to business: the US added 678,000 jobs, compared to the 440,000 economists were expecting. That’s the biggest monthly uptick since July, and means the total number of Americans in employment is now around 1 million short of where it was before Covid. The leisure and hospitality sector – which was hit hardest by pandemic restrictions – kept up its strong showing from the month before with 179,000 new starters, but sectors like professional services, healthcare and construction all posted tidy numbers too.

Why should I care?

For markets: Once the Fed pops, it won’t stop.

The Federal Reserve (the Fed) said last week that it’s still planning to hike interest rates this month, and Friday’s data suggests the economy’s strong enough for it to do just that. And since the central bank said it’s expecting the Russian invasion to push prices even higher, it didn’t rule out even tougher measures: the Fed said it might hike rates a number of times this year, and potentially by more than the normal 0.25%. That might be why traders are now betting that rates will be around 1.5% higher by the end of 2022.

The bigger picture: Europe does a U-turn.

The European Central Bank (ECB) isn’t on such sure footing: the region’s economic growth isn’t just at risk from rising inflation, but also from a war that’s hampering trade and investment. The ECB hadn’t intended to raise interest rates anytime soon like the Fed did, but it had intended to roll back its bond-buying program. Now, though, some economists think the ECB might put that plan on hold.

Originally Posted March 4, 2022 – Virtue Signaling

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