Wall Street Breakfast: Wage Watch

The labor market is still "out of balance," Fed Chair Jerome Powell said at a press conference earlier this week, putting today's non-farm payrolls report high up on the watchlist. Economists expect the U.S. economy to have added 185K jobs in January, down from the 223K added in December, with the unemployment rate forecast to tick up to 3.6% (from 3.5%) amid an increasing amount of layoffs. However, the bigger piece of the puzzle is wage growth, which will directly influence how central bank policymakers view the current inflation landscape and how the economy is developing. Bigger picture: The Fed wants to make sure that new job growth slows enough to cut the gap between labor supply and demand, so that wages don't contribute to inflationary pressures. This dislocation was seen in the recent JOLTS report that showed the number of job openings unexpectedly rising to just over 11M in December vs. 10.4M in the previous month. With almost two job openings for every job seeker, that can lead to higher wages, such as the recent increase seen at Walmart (WMT), the nation's largest employer. The labor force participation, which has stayed stubbornly low since the pandemic, also isn't helping. In December, it ticked up to 62.3%, from 62.2% in the previous month, but remains a full percentage point below its February 2020 level. Remember, until the Fed's next monetary policy decision, there will be one more non-farm payrolls report, two more consumer price index releases, as well as one on personal consumption expenditures report - each of which gives more insight into inflation dynamics. See why SA contributor Damir Tokic expects today's payroll report will confirm an imminent recession.Revisions on tap: There are several factors in this morning's NFP report - published at 8:30 AM ET - that could shed new light on the state of the labor market. First off, the Labor Department will release its annual benchmark revisions that seek to iron out seasonal fluctuations with more definitive data in the establishment survey. In addition to updating the formulas, new population figures will be incorporated in the household survey - which affects the employment rate - due to fresh estimates from the U.S. Census Bureau. (6 comments)

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Top News Wage watch Getty Images The labor market is still "out of balance," Fed Chair Jerome Powell said at a press conference earlier this week, putting today's non-farm payrolls report high up on the watchlist. Economists expect the U.S. economy to have added 185K jobs in January, down from the 223K added in December, with the unemployment rate forecast to tick up to 3.6% (from 3.5%) amid an increasing amount of layoffs. However, the bigger piece of the puzzle is wage growth, which will directly influence how central bank policymakers view the current inflation landscape and how the economy is developing. Bigger picture: The Fed wants to make sure that new job growth slows enough to cut the gap between labor supply and demand, so that wages don't contribute to inflationary pressures. This dislocation was seen in the recent JOLTS report that showed the number of job openings unexpectedly rising to just over 11M in December vs. 10.4M in the previous month. With almost two job openings for every job seeker, that can lead to higher wages, such as the recent increase seen at Walmart (WMT), the nation's largest employer. The labor force participation, which has stayed stubbornly low since the pandemic, also isn't helping. In December, it ticked up to 62.3%, from 62.2% in the previous month, but remains a full percentage point below its February 2020 level. Remember, until the Fed's next monetary policy decision, there will be one more non-farm payrolls report, two more consumer price index releases, as well as one on personal consumption expenditures report - each of which gives more insight into inflation dynamics. See why SA contributor Damir Tokic expects today's payroll report will confirm an imminent recession. Revisions on tap: There are several factors in this morning's NFP report - published at 8:30 AM ET - that could shed new light on the state of the labor market. First off, the Labor Department will release its annual benchmark revisions that seek to iron out seasonal fluctuations with more definitive data in the establishment survey. In addition to updating the formulas, new population figures will be incorporated in the household survey - which affects the employment rate - due to fresh estimates from the U.S. Census Bureau. (6 comments)       Featured Get 50% off your first year of Premium! Earnings drive stock prices, leading to big gains and painful losses. If you want to get ahead of earnings and discover potential hits and misses, Seeking Alpha Premium has everything you need - and it's now 50% off. You can pinpoint the most compelling opportunities with up-to-the-minute analysis, earnings transcripts, and quality stock ratings.  Empower your investing with Premium this earnings season - now at 50% off for your first year! Go Premium now * Past performance is no guarantee of future results. Seeking Alpha does not take account of your objectives or financial situation. Earnings Tech wreck Risk-on sentiment deflated after the bell on Thursday following a slew of disappointing results from Big Tech. iPhone weakness and FX headwinds led Apple (AAPL) to report a FQ1 miss, prompting shares to fall 3.7% AH. Things weren't any better at Amazon (AMZN), which posted softer cloud growth and slipped 5.1%, as well as Alphabet (GOOG, GOOGL), which stumbled 4.6% after missing Wall Street estimates (see what Google said about artificial intelligence). Despite the losses, all three stocks were net gainers on Thursday - following a bumper session during regular trading - though concerns remain. Keep an eye out for how a macro slowdown and a hit to demand are making the digital economy more challenging. (90 comments)       Outlook Subject to interpretation Central banks continue to be in focus, especially as policy diverges following an aggressive rate-hiking party. Compared to a slower 25 basis point increase by the Federal Reserve earlier this week, the Bank of England and European Central Bank both raised rates by 50 basis points each on Thursday. While the former indicated that a pause could be coming, the latter said it expects to increase rates again in March. Bank officials and policymakers have also indicated that the fight against inflation is not yet over, and it's "too soon to declare victory," but many market participants are trying to translate those signals into dovish events. (9 comments)       Analysis Surprise! Defensive sectors are still the place to look for stocks that can provide a combo of value and growth, according to BofA's quantamental Alpha Surprise model. The approach uses a combination of its Dividend Discount Model (the value or 'alpha' portion) and the BofA vs. Consensus Forecast Earnings Surprise Model (the growth or 'surprise' portion). Merck (MRK), Cardinal Health (CAH) and General Mills (GIS) are among the new names on the list for February (see all the latest additions and deletions). For a more technical take on large-caps, our latest screen shows many more S&P 500 (SP500) stocks in Overbought territory than Oversold (here's the full list). (6 comments)       Today's Markets In Asia, Japan +0.4%. Hong Kong -1.4%. China -0.7%. India +1.5%. In Europe, at midday, London +0.2%. Paris -0.2%. Frankfurt -0.6%. Futures at 6:30, Dow -0.3%. S&P +0.8%. Nasdaq -1.5%. Crude flat at $75.85. Gold -0.3% to $1925. Bitcoin -1.5% to $23,437. Ten-year Treasury Yield unchanged at 3.39% Today's Economic Calendar 8:30 Non-farm payrolls 9:45 PMI Composite Final 10:00 ISM Service Index 1:00 PM Baker-Hughes Rig Count Companies reporting earnings today » What else is happening... Ford (F) CEO says automaker 'left $2B in profits on the table.' EV race: XPeng (XPEV) heats up the competition in Europe. Qualcomm (QCOM) earnings show effects of smartphone slowdown. Weakness in China leads to comp sales miss at Starbucks (SBUX). Next target: Nordstrom (JWN) jumps as Ryan Cohen said to take stake. Short squeeze rallies may be firing up again - watch these stocks. Falling demand for COVID therapy hurts Eli Lilly's (LLY) topline. ConocoPhillips (COP) slips after Q4 miss; return program a bit light. As Blinken prepares for trip to China, spy balloon spotted in the U.S. Hershey (HSY) issues bullish guidance despite macro uncertainty. Seeking Alpha's Wall Street Breakfast Podcast Seeking Alpha's Wall Street Breakfast podcast brings you all the news you need to know for your market day. Released by 8:00 AM ET each morning, it is a quick listen that you can put on as you get ready to start your working day.
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