Daily Brief, January 9, 2023: US Labor Data Indicate Ease in Inflation Pressure

December Non-Farm Payrolls Data 

In December, the US economy created more jobs than economists had anticipated, and the unemployment rate dropped. Data issued by the US Bureau of Labor Statistics on Friday, January 6, showed that the economy added 223,000 jobs last month. This number came better than expectations of adding 200,000 jobs, yet less than jobs added in November, which was revised to 256,000 from 263,000 . Analyzing these figures by industry, the hospitality and leisure sector, which added 67,000 more employment, experienced the most remarkable growth. 55,000 people were employed in healthcare, 28,000 in construction, and 20,000 in social services. 

Job Report and Fed’s Interest Rate Decision 

The US unemployment rate declined by 0.2% to 3.5%, despite expectations of remaining unchanged from November. However, wages grew less than expected. Average hourly earnings rose by 0.3% month-on-month and 4.6% year-on-year, compared to expectations of 0.4% and 5%, respectively.  

The Federal Reserve relies heavily on the jobs report in its monetary policy decisions. The modest wage increase strongly indicates that inflation pressures are cooling down in the US economy. Therefore, investors began to place hopes in anticipation that these figures would encourage the Federal Reserve to loosen the tightening monetary policy it had been enforcing over the previous year. Expectations of a 25bps rate hike increased to 80% following the job report.  

SNB Announces Largest Annual Loss in its History 

The Swiss National Bank announced Monday that its 2022 annual loss was the largest in its 115-year history. The bank posted a yearly loss of 132 billion Swiss francs ($143 billion) in 2022. SNB released the provisional figure on Monday. The worth of its stock and bond holdings was negatively impacted by declining equity and fixed-income markets; The stronger Swiss franc also had a detrimental effect. 

The 2022 annual loss is far more significant than 2015, which recorded a 23 billion francs loss—knowing that the annual figures of 2021 had shown 26 billion francs in profit. The SNB’s gold holdings were the lone bright spot. The gold holdings totaled 1,040 tonnes at the end of 2021 and increased in value by 400 million francs in 2022. The central bank said it would not distribute its normal distribution to the Swiss central and regional governments in 2022 due to the loss.  

The SNB will release detailed annual figures on March 6. 

Oil Prices Rise Amid Reopening of China’s Borders 

China finally lifted the mandatory quarantine for travelers arriving from abroad, ending a three-year self-imposed isolation. Travelers have begun to flow through land and sea crossings from Hong Kong into mainland China after three years of closure, with the end of requiring incoming travelers to undergo quarantine, eliminating one of the last measures under the zero-COVID policy. 

The reopening supported oil prices, which rose on Monday, January 9. The reopening has increased predictions for fuel demand and partially dispelled worries about a world recession. Brent crude futures advanced 0.7% to $79.10 a barrel, while US West Texas Intermediate WTI crude rose 0.6% to $74.23. 

Gold Nears 7-month High 

Gold prices rose Monday, January 9, nearing their highest level in 7 months. The price rise was supported by the decline in the dollar and hopes that the Federal Reserve would slow down the pace of raising interest rates. XAU/USD currently trades at $1875.43/ounce at the time of writing. 

McDonald’s Plans Corporate Employees Layoff 

McDonald’s CEO Chris Kempczynski said the company intends to reorganize its business and cut jobs as it seeks to refocus its priorities to accelerate the expansion of its chain of restaurants. Kempczynski said in a statement that the job cuts are not intended to cut costs but rather to help accelerate innovation and work more efficiently. 

The company also indicated that it would accelerate plans to develop new restaurants, as it operates in 169 markets worldwide. The fast food chain has yet to decide how many new restaurants it will build or which jobs it will cut. Still, Kempczynski indicated that the company would finalize those plans and notify employees of the dismissal decisions on April 3. 

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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