More Rate Increases to Follow U.S. Jobs Report; Bank of Japan Deputy Governor Reportedly Approached for Top Job at Central Bank By James Christie
Good day. It looks as if the Federal Reserve's campaign of aggressive interest rate increases last year hasn't significantly cooled the U.S. labor market, which could fuel more difficult debates at the central bank over whether it has done enough to bring down high inflation. U.S. employers added 517,000 jobs last month and the unemployment rate fell to 3.4%, the lowest level since 1969, the Labor Department said Friday. The department also revised previous months' reported gains higher, suggesting the economy had more momentum than previously anticipated. Taken together, it points to the Fed raising interest rates by a quarter percentage point at its meeting next month and signaling another increase is likely after that. Meanwhile, Japanese stocks rallied and the yen slumped on Monday after a report that Bank of Japan Deputy Gov. Masayoshi Amamiya, perceived as more dovish than other potential candidates, was approached by the government as a possible successor to Gov. Haruhiko Kuroda. The BOJ is increasingly isolated among global central banks in sticking to ultraloose monetary policy. Whoever succeeds Mr. Kuroda, who stands down in April, has the difficult task of judging whether to adjust monetary policy to a period of higher inflation.
Now on to today's news and analysis.
Top News Job Gains Keep the Fed on Track to Push Rates Higher
Fresh signs of a hot U.S. labor market leave the Federal Reserve on course to raise interest rates by a quarter percentage point at its meeting next month and to signal another increase is likely after that.
The Fed voted Wednesday to raise its benchmark federal-funds rate by a quarter point to a range between 4.5% and 4.75%. The central bank is seeking to slow economic growth to a below-average pace to weaken demand and restrain inflation, which has eased recently after hitting a 40-year high last year.
Mary Daly Says 'Wow' Jobs Report Doesn't Upend Fed Projections
Federal Reserve guidance on how much interest rates may need to rise remains a good policy indicator after Friday's robust jobs report, San Francisco Fed President Mary Daly said, adding she is prepared to do more if needed.
Upbeat Economic Data Keep Investors on Edge About Fed Japanese Stocks Rally, Yen Wobbles on Report of Next BOJ Governor
Japanese stocks rose and the yen weakened after a report that Bank of Japan Deputy Gov. Masayoshi Amamiya had been sounded out as a possible successor to Gov. Haruhiko Kuroda, who stands down in April.
U.S. Economy Unemployment Falls to 3.4%, Lowest in 53 Years, Jobs Report Shows
January's payroll gains were the largest since July 2022 and snapped a string of five straight months of slowing employment growth, and the unemployment rate was 3.4% last month, its lowest level since May 1969 .
Restaurant, Healthcare Jobs Led January Hiring Surge Why Job Forecasts Often Miss the Mark
Banks Borrow Unsecured Cash at Record Clip While Deposits Flee
Borrowing in the fed-funds market hit $120 billion on Jan. 27, the highest one-day total in Federal Reserve data since 2016. Activity in fed funds surged the past year as the Fed raised interest rates at the fastest pace in decades.
States Are Flush With Cash, Which Could Soften a Possible Recession
State governments are entering 2023 with record-high reserves , as the economic recovery from the pandemic and federal stimulus money has filled public coffers, allowing governments to squirrel funds away for emergencies.
Housing Market Shows Signs of Thawing
Falling mortgage rates are beginning to stir demand in the housing market. The average 30-year home loan rate has come down by just about a full percentage point from a 20-year high above 7% in November.
Child Care Hasn't Recovered From Covid
The high cost and limited availability of child care is keeping some parents out of the labor force when unemployment is at its lowest rate in more than half a century. That limited supply of labor is also keeping upward pressure on costs.
Key Developments Around the World Group of Seven Agrees to Expand Sanctions on Russian Oil Industry
The U.S. and its allies agreed to cap the sales price of premium Russian petroleum products such as diesel at $100 a barrel and limit low-value ones such as fuel oil to $45 a barrel, expanding sanctions on Russia's oil industry.
War in Ukraine Tips Power Balance Inside EU China Aids Russia's War in Ukraine, Trade Data Shows Russia's Ukraine War Effort Fueled by Turkish Exports Ukraine War Makes Unexpected Winner of Turkey's Erdogan
IMF Tempers Its Medium-Term Economic Growth Forecast for China
The International Monetary Fund now expects that in five years China will grow at an annual rate of 3.8% , according to its latest assessment of the Chinese economy, down from an October projection of 4.6%.
Caribbean Seeks Venezuela's Oil and Gas
Caribbean countries are turning to Venezuela for oil and gas as the U.S. eases sanctions , with Trinidad and Tobago receiving a U.S. Treasury Department license in January to develop a Venezuelan gas field.
Financial Regulation Roundup SEC Considers Easing Climate-Disclosure Rules
The SEC is considering a softening of planned rules requiring companies to disclose the effects of extreme weather and other costs related to global warming when the regulator completes its climate-change proposals.
Bankman-Fried's Robinhood Investment Vehicle Files for Chapter 11
Court-appointed liquidators for Emergent Fidelity Technologies Ltd. in Antigua and Barbuda placed the investment entity under bankruptcy protection following the seizure of its assets by federal prosecutors last month.
How Bankman-Fried's Psychiatrist Became a Key Player at FTX Crypto Crisis: A Timeline of Key Events Forward Guidance Monday (all times ET)
10 a.m.: The Conference Board Employment Trends Index for U.S. for January
1 p.m.: ECB's Lagarde meets with the presidents of the European Council and European Commission
10:30 p.m.: Reserve Bank of Australia interest rate decision
Tuesday
4 a.m.: ECB Consumer Expectations Survey results
8:30 a.m.: Canada trade report for December; U.S. trade report for December
10:30 a.m.: Bank of England's Cunliffe speech on central bank digital currency at UK Finance
12 p.m.: Fed's Powell speaks at Economic Club of Washington, DC; ECB's Schnabel in webinar on monetary policy in times of pandemic and war hosted by Finanzwende e.V.
12:45 p.m.: Bank of Canada's Macklem speech to CFA Society Quebec
3 p.m.: U.S. consumer credit report for December
Research Robust Jobs Report Means Fed's Job Just Got Tougher
With 517,000 new jobs in January and unemployment dropping to 3.4%, the Federal Reserve's job just got tougher and hopes for a pivot by the central bank soon are fading fast-but so are fears of a recession, Navellier & Co. chairman Louis Navellier says in a note. "The bond market took a look at the payroll blowout numbers...and took yields up strongly," and the dollar firms while gold tanks, he says. "Can another few light taps on the brakes by the Fed slow down this apparently strong economy? The risk of recession is fading, the economy appears strong enough to handle a 5% fed-funds rate, and money is coming off the sidelines from fear of missing out," Mr. Navellier says, adding that being underinvested appears to be the risky strategy for now.
-Jonathan Vuocolo
Tight U.S. Labor Market to Change Economic Forecasts
"The January employment report emphatically underscored that the labor market remains hot and the U.S. economy's demise has been greatly exaggerated," Stephen Stanley, chief economist at Amherst Pierpont, writes in a note about Friday's U.S. nonfarm payroll data. "Any way you slice it, this is a robust set of numbers, and the report should fundamentally change the prevailing economic narrative," he writes, adding that the Federal Reserve "lives in a Phillips Curve-driven world, so hot labor market data is inevitably going to make a critical difference in how policymakers see the inflation outlook." Mr. Stanley also sees consumer prices accelerating in January and dashing hopes of a painless disinflation this year.
-Paulo Trevisani
Commentary Jobs Market Parties Like It's 1969
The Federal Reserve is obviously pleased with how inflation has been cooling lately, but Friday's jobs report would add to worries that wage growth could reaccelerate, making inflation less tractable, Justin Lahart writes.
Basis Points U.S. service-sector activity grew in the first month of the year, marking a rebound after December snapped a run of 30 straight months of growth. The Institute for Supply Management's services activity index rose to 55.2 from a downwardly revised 49.2 in December, topping the 50.6 expected by economists polled by The Wall Street Journal. A reading of 50 marks the separation between expansion and contraction. (Dow Jones Newswires) Canada's official international reserves increased by $2.65 billion in January, the federal finance department said Friday. As of Jan. 31, reserves of foreign currencies and other monetary assets totaled $109.91 billion, an increase from $107.26 billion a month earlier. The government reported no intervention in the foreign-currency market in January, and there were no gold holdings at the end of the month. (DJN) The pace of Indonesia's economic growth slowed in the fourth quarter as government spending fell. The economy grew 5.01% in the fourth quarter, compared with the same period a year earlier, Indonesia's official statistics agency. Expansion slowed from the 5.72% growth in the previous quarter and was slightly over the median estimate for 4.95% growth from a Wall Street Journal poll of six economists. (DJN) Brazil's industrial production was stable in December from November after increases in output of capital goods and consumer goods was balanced by a decline in production of intermediate goods. Production fell 1.3% from a year earlier, the Brazilian
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02-06-23 0717ET
