Stock Markets
US labor market sizzles; delivers large job and wage gains
© Reuters. FILE PHOTO: A “Help Wanted” sign hangs in a restaurant window in Medford, Massachusetts, U.S., January 25, 2023. REUTERS/Brian Snyder/File Photo
By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job growth accelerated in January and wages increased by the most in nearly two years, signs of persistent strength in the labor market that could make it difficult for the Federal Reserve to start cutting interest rates in May as currently envisaged by financial markets.
Nonfarm payrolls increased by 353,000 jobs last month. The closely watched employment report from the Labor Department’s Bureau of Labor Statistics on Friday also showed the unemployment rate at 3.7% last month.
The economy added 126,000 more jobs in November and December than previously estimated. Financial markets lowered their expectations for a May rate cut on the data.
Resilient demand and strong worker productivity are likely encouraging businesses to hire and retain more employees, a trend that could shield the economy from a recession this year.
“Given the Fed now wants strong job growth, as (Fed Chair) Jerome Powell told us just two days ago, this report should not discourage the Fed from cutting rates,” said Chris Low, chief economist at FHN Financial in New York. “By the same token, however, it is not going to encourage them to rush into rate cutting.”
Economists polled by Reuters had forecast payrolls increasing 180,000 last month.
Estimates ranged from 120,000 to 290,000. Employment gains remain well above the roughly 100,000 jobs per month needed to keep up with growth in the working age population. Nonetheless, labor market momentum has slowed from the robust pace in 2022 because of hefty interest rate hikes from the Federal Reserve.
Annual “benchmark” revisions showed the economy created 266,000 fewer jobs in the 12 months through March 2023 than previously reported. The revisions were derived from updated data from state unemployment insurance tax records that nearly all employers are required to file.
Still, job gains are more than sufficient to sustain the economy through strong consumer spending.
Average hourly earnings increased 0.6% last month, the biggest gain since March 2022, after rising 0.4% in December. In the 12 months through January, wages increased 4.5% after advancing 4.3% in December.
Annual wage growth is well above its pre-pandemic average and the 3.0% to 3.5% range that most policymakers view as consistent with the U.S. central bank’s 2% inflation target, supporting views that March is probably too early for the Fed to start cutting rates.
Financial markets reduced the odds of a rate cut at the Fed’s April 30 and May 1 policy meeting to near 60% from about 90% before the data. The Fed left interest rates unchanged on Wednesday. Fed Chair Jerome Powell offered a sweeping endorsement of the economy’s strength, telling reporters that interest rates had peaked and would move lower in coming months.
Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range.
The dollar rose against a basket of currencies. U.S. Treasury prices fell.
BROAD GAINS
Most economists were dismissive of recent high-profile layoffs including 12,000 job cuts announced by United Parcel Service (NYSE:) this week, arguing that the focus should be on worker productivity, which has exceeded a 3% annualized growth pace for three straight quarters, and cooling labor costs.
Employers are generally wary of sending workers home following difficulties finding labor during and after the COVID-19 pandemic. But some companies, which enjoyed a boom in business during the pandemic, are laying off workers as conditions return to normal.
“We know that most layoffs in recent years were from cost cutting and not from weaker demand,” said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:) in Charlotte, North Carolina. “This means businesses are in a good position despite the macro headwinds and uncertainty about growth expectations.”
Job gains last month were across the board. Professional and business services added 74,000 jobs, with temporary help services employment rebounding 3,900. Healthcare payrolls rose by 70,000 jobs, spread across ambulatory, hospitals as well as nursing and residential care facilities.
Retail trade employment increased by 45,000 jobs, while manufacturing hired 23,000 more workers. Government payrolls increased by 36,000, driven by federal government hiring as well as local government, excluding education.
The unemployment rate was at 3.7% in January. New population estimates were incorporated into the household survey, from which the unemployment rate is derived, creating a break in the series. The population controls had no impact on the jobless rate, which was at 3.7% in December.
Stock Markets
Palantir, Anduril join forces with tech groups to bid for Pentagon contracts, FT reports
(Reuters) – Data analytics firm Palantir Technologies (NASDAQ:) and defense tech company Anduril Industries are in talks with about a dozen competitors to form a consortium that will jointly bid for U.S. government work, the Financial Times reported on Sunday.
The consortium, which could announce agreements with other tech groups as early as January, is expected to include SpaceX, OpenAI, autonomous shipbuilder Saronic and artificial intelligence data group Scale AI, the newspaper said, citing several people with knowledge of the matter.
“We are working together to provide a new generation of defence contractors,” a person involved in developing the group told the newspaper.
The consortium will bring together the heft of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way of supplying the U.S. government with cutting-edge defence and weapons capabilities, the newspaper added.
Palantir, Anduril, OpenAI, Scale AI and Saronic did not immediately respond to a Reuters request for comment. SpaceX could not be immediately reached for a comment.
Reuters reported earlier this month that President-elect Donald Trump’s planned U.S. government efficiency drive involving Elon Musk could lead to more joint projects between big defense contractors and smaller tech firms in areas such as artificial intelligence, drones and uncrewed submarines.
Musk, who was named as a co-leader of a government efficiency initiative in the incoming government, has indicated that Pentagon spending and priorities will be a target of the efficiency push, spreading anxiety at defense heavyweights such as Boeing (NYSE:) , Northrop Grumman (NYSE:) , Lockheed Martin (NYSE:) and General Dynamics (NYSE:) .
Musk and many small defense tech firms have been aligned in criticizing legacy defense programs like Lockheed Martin’s F-35 fighter jet while calling for mass production of cheaper AI-powered drones, missiles and submarines.
Such views have given major defense contractors more incentive to partner with emerging defense technology players in these areas.
Stock Markets
Weakened Iran could pursue nuclear weapon, White House’s Sullivan says
By Simon Lewis (JO:)
(Reuters) -The Biden administration is concerned that a weakened Iran could build a nuclear weapon, White House National Security Adviser Jake Sullivan said on Sunday, adding that he was briefing President-elect Donald Trump’s team on the risk.
Iran has suffered setbacks to its regional influence after Israel’s assaults on its allies, Palestinian Hamas and Lebanon’s Hezbollah, followed by the fall of Iran-aligned Syrian President Bashar al-Assad.
Israeli strikes on Iranian facilities, including missile factories and air defenses, have reduced Tehran’s conventional military capabilities, Sullivan told CNN.
“It’s no wonder there are voices (in Iran) saying, ‘Hey, maybe we need to go for a nuclear weapon right now … Maybe we have to revisit our nuclear doctrine’,” Sullivan said.
Iran says its nuclear program is peaceful, but it has expanded uranium enrichment since Trump, in his 2017-2021 presidential term, pulled out of a deal between Tehran and world powers that put restrictions on Iran’s nuclear activity in exchange for sanctions relief.
Sullivan said that there was a risk that Iran might abandon its promise not to build nuclear weapons.
“It’s a risk we are trying to be vigilant about now. It’s a risk that I’m personally briefing the incoming team on,” Sullivan said, adding that he had also consulted with U.S. ally Israel.
Trump, who takes office on Jan. 20, could return to his hardline Iran policy by stepping up sanctions on Iran’s oil industry.
Sullivan said Trump would have an opportunity to pursue diplomacy with Tehran, given Iran’s “weakened state.”
“Maybe he can come around this time, with the situation Iran finds itself in, and actually deliver a nuclear deal that curbs Iran’s nuclear ambitions for the long term,” he said.
Stock Markets
Ukraine says Russian general deliberately targeted Reuters staff in August missile strike
(Reuters) -Ukraine’s security service has named a Russian general it suspects of ordering a missile strike on a hotel in eastern Ukraine in August and said he acted “with the motive of deliberately killing employees of” Reuters.
The Security Service of Ukraine (SBU) said in a statement on Friday that Colonel General Alexei Kim, a deputy chief of Russia’s General Staff, approved the strike that killed Reuters safety adviser Ryan Evans and wounded two of the agency’s journalists on Aug. 24.
In a statement posted on Telegram messenger the SBU said it was notifying Kim in absentia that he was an official suspect in its investigation into the strike on the Sapphire Hotel in Kramatorsk, a step in Ukrainian criminal proceedings that can later lead to charges.
In a separate, 15-page notice of suspicion, in which the SBU set out findings from its investigation, the agency said that the decision to fire the missile was made “with the motive of deliberately killing employees of the international news agency Reuters who were engaged in journalistic activities in Ukraine”.
The document, which was published on the website of the General Prosecutor’s Office on Friday, said that Kim had received intelligence that Reuters staff were staying in Kramatorsk. It added that Kim would have been “fully aware that the individuals were civilians and not participating in the armed conflict”.
The Russian defence ministry did not respond to a request for comment on the SBU’s findings and has not replied to previous questions about the attack. The Kremlin also did not respond to a request for comment. Kim did not reply to messages sent by Reuters to his mobile telephone seeking comment about the SBU’s statement and whether the strike deliberately targeted Reuters staff.
The SBU did not provide evidence to support its claims, nor say why Russia targeted Reuters. In response to questions from the news agency, the security agency declined to provide further details, saying its criminal investigation was still under way and it was therefore not able to disclose such information.
Reuters has not independently confirmed any of the SBU’s claims.
Reuters said on Friday: “We note the news today from the Ukrainian security services regarding the missile attack on August 24, 2024, on the Sapphire Hotel in Kramatorsk, a civilian target more than 20 km from Russian-occupied territory.”
“The strike had devastating consequences, killing our safety adviser, Ryan Evans, and injuring members of our editorial team. We continue to seek more information about the attack. It is critically important for journalists to be able to report freely and safely,” the statement said.
Reuters declined to comment further on the allegation that its staff were deliberately targeted.
The SBU statement said Kim had been named a suspect under two articles of the Ukrainian criminal code: waging an aggressive war and violating the laws and customs of war.
“It was Kim who signed the directive and gave the combat order to fire on the hotel, where only civilians were staying,” it said.
Evans, a 38-year-old former British soldier who had worked as a safety adviser for Reuters since 2022, was killed instantly in the strike.
The SBU statement gave some details about how the strike had occurred, according to its investigation.
“To carry out the attack, the Russian colonel general involved one of his subordinate missile forces units,” the Ukrainian agency said, adding that the strike was carried out with an Iskander-M ballistic missile.
The SBU did not identify the specific unit.
Ivan Lyubysh-Kirdey, a videographer for the news agency who was in a room across the corridor, was seriously wounded. Kyiv-based text correspondent Dan Peleschuk was also injured.
The remaining three members of the Reuters team escaped with minor cuts and scratches.
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