Obviously nothing big happened this week, just the small surprise in the number of first-time unemployment claims (231k vs 212k) was enough to push all major asset classes higher in unison, and given the Fed’s recent shift of focus to the weakness in the job market, the market undoubtedly took this information very seriously and tried to find all signs of a slowdown in the job market to rekindle hopes of a rate cut. As mentioned earlier, the current asymmetric risk-reward setup (the Fed ignores high inflation and looks for signs of slowing employment) should generally favor risky assets, so stocks, bond prices and even BTC all rose in tandem after the release of the unemployment benefit data.
Looking deeper into recent employment data, while nonfarm payrolls are still relatively healthy at 175,000 a month, and the unemployment rate is still low at 3.9%, some alternative job market indicators are beginning to show some cracks, and Powell himself specifically mentioned the decline in hiring rates and the weakness in employment surveys in the Q&A as signs of weakening labor demand. In addition, other sub-indicators, such as an increase in permanent unemployment, a decline in the quits rate, a decrease in hiring plans, and a widening "hard-to-find work" ratio, all suggest that the U.S. economy may fall into a more pronounced job market slowdown in the second half of the year, while the excess savings accumulated during the pandemic era have also been exhausted.
Next week, the CPI data will be released, and the market should become active again and challenge the recent ideal prosperity of the market. I wish you all a happy weekend!
