Benzinga - by Shanthi Rexaline, Benzinga Editor.
The non-farm payrolls report released last week revealed a robust addition of 303,000 jobs to the U.S. economy in March. However, Ark Investment Management founder Cathie Wood expressed concerns regarding two labor market trends highlighted by economists.
Low-Quality Job Gains: Economist Marko Bjegovic, founder of Arkomina Research, pointed out that private payrolls and total non-farm payrolls have mostly been revised down over the past 14 months since January 2023, while government jobs saw upward revisions. He noted that the government sector added 903,000 jobs since January 2023, one of the largest increases on record. However, he cautioned that an increase in government jobs might not necessarily be beneficial for the economy.
Bjegovic also highlighted discrepancies between establishment survey employment, which increased by 2.927 million in the last 12 months, and household survey employment, which saw a more modest rise of 642,000. He emphasized that full-time employment decreased significantly by 1.347 million, with all job gains coming from part-time positions.
“NFP figures have been strong but UR and other parts of the household survey tell a different (recessionary) story,” Bjegovic said.
Commenting on his post, Wood said, “Interesting and provocative employment history here, seemingly not a good omen for the future.”
Interesting and provocative employment history here, seemingly not a good omen for the future. https://t.co/LbYbAi6q2m— Cathie Wood (@CathieDWood) April 8, 2024
Americans Left Behind: Wood also addressed remarks from economist E.J. Antoni, who noted an increase in the share of foreign-born employment compared to native-born Americans. Antoni pointed out that foreign-born employment has surpassed pre-pandemic levels and trends, while native-born employment has stagnated.
“Some have tried to blame the decline of native-born employment on Americans retiring, but that would only be enough of a change to slow the rate of growth, not turn it into decline,” he added.
Americans have been completely left behind in this economy: foreign-born employment is not only several million above its pre-pandemic level but is even above its pre-pandemic trend, while native-born Americans have made no progress in 4 years – in fact, they've gone backwards: pic.twitter.com/AsADABdxQb— E.J. Antoni, Ph.D. (@RealEJAntoni) April 5, 2024
Wood added, “While this dichotomy in employment gains has been in place since 2010, the widening gap since COVID is thought-provoking.”
Why It’s Important: The Federal Reserve’s stance against a rate cut is partly based on the perceived strength of the economy, supported by a robust labor market and resilient consumers. However, scrutinizing the data reveals potential weaknesses not reflected in the headline numbers. Economists are divided on inflation, with some attributing the recent stalling of the downtrend to statistical aberrations.
Former Treasury official and Harvard University economist Larry Summers cautioned that the neutral rate may be higher than the Fed’s current projections, suggesting the need to maintain the current Fed funds rate for longer than anticipated. Despite these warnings, the stock market has continued to climb, fueled by expectations of multiple rate cuts by the Fed this year.
The SPDR S&P 500 ETF Trust (NYSE:SPY), an exchange-traded fund that tracks the broader S&P 500 Index, ended Friday’s session up 1.04% at $518.43, according to data from Benzinga Pro. The index has gained 9.41% year-to-date.
Read Next: Hawkish Fed Voices Lead To Market Slide: ‘It’s Possible Fed Won’t Cut This Year If Inflation Stalls’
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