The Dow Jones fell more than 300 points on Thursday as strong jobs data spooked investors.
A number of reports this week show that the labor market is still resilient to the Federal Reserve’s attempts to tame inflation by raising interest rates and cooling the economy. The reports have investors worried that the central bank will continue its painful hiking regime into 2023.
Stocks fell as the ADP Private Payrolls report showed employers added 235,000 jobs in December, above analyst estimates. Wages also grew faster than estimates. Government data also showed that The weekly jobless claims came in below expectationsfalling to its lowest level since September and dealing another blow to investors hoping the Fed will be less hawkish.
This news comes on the heels of yesterday’s November Report vacancies and labor turnoveror JOLTS, which also came out stronger than expected.
“If you look at the indicators in the labor market, and if you look at very complex components of inflation such as inflation in services, I think it is clear that we are not turning the corner on inflation yet,” Gita Gopinath, the second member of the International Monetary Fund, said. he told the Financial Times this week. She said the IMF’s advice to the Fed was to “stay the course”.
Gopinath said her main concern is the continued resilience of the US labor market, as unemployment remains near historic lows and wage increases remain too high for the Fed to hit its 2% inflation target.
Meanwhile, the Fed’s December meeting minutes highlighted that policymakers plan to keep interest rates high for some time.
Investors are eagerly awaiting Friday’s jobs report for more data on how the labor market will respond to higher interest rates. In today’s bad economy, the weaker jobs report is likely to be celebrated.
In other news, shares of Bed, Bath & Beyond lost nearly 30% after the company warned it was considering bankruptcy. Silvergate Capital, a cryptocurrency-friendly bank, fell about 43% after revealing major customer withdrawals and announcing a 40% cut in its staff.
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