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LGT Navigator: Fed remains on course following latest jobs report

January 10, 2022

The US labor market created only half as many new jobs as expected in December, but employment growth remains solid and the recovery continues. In addition, the unemployment rate fell below 4% and wages rose more strongly than expected. This is likely to confirm the Federal Reserve's decision to continue the normalization of the monetary policy which has already been initiated. As a result, the yield on ten-year US government bonds climbed to 1.79%.

Fed remains on course following latest jobs report

On the New York Stock Exchange, the stock indices did not get off the ground after the latest US labor market report. The Dow Jones Industrial went out of trading on Friday virtually unchanged and fell slightly in the first week of the new year. The S&P 500 lost nearly half a percent on Friday, and indexes on the Nasdaq technology exchange lost just over one percent. For the week, Nasdaq indexes fell about four and a half percent amid higher interest rate expectations. The investment bank Goldman Sachs now expects four interest rate hikes by the Federal Reserve in the current year.

Continued but slower than expected recovery on the US labor market

The latest US labor market statistics showed significantly weaker job growth at the end of last year. According to the report, 199'000 new jobs were created in the overall economy compared to a consensus expectation of 450'000 new jobs. On the other hand, however, a total of 141'000 more jobs were created in November and October than initially reported. The recovery is thus continuing, albeit at a somewhat slower pace than hoped. The unemployment rate surveyed in a separate poll even fell below the 4% mark in December and, after 4.2% in November, now stands at 3.9% (consensus 4.1%), the lowest level since the start of the corona crisis in February 2020. At the same time, wages rose by +4.7% in December on an annual basis and by +0.6% compared with the previous month. Here, +4.2% and +0.4%, respectively, had been expected.

Inflation rate in the eurozone at record high again at the end of 2021

Consumer prices in the euro area rose by +5.0% year-on-year in December, the highest inflation rate since the introduction of the euro. Compared with the previous month, consumer prices rose by +0.4% in December. Energy prices remained the main driver, rising by +26% on an annual basis. However, food also increased significantly (+3.2%). At the core rate, i.e. excluding energy and food prices, inflation was +2.6%.

Economic sentiment in the euro zone clouds over more than expected

According to the Economic Sentiment Indicator (ESI) reported by the EU Commission, general economic sentiment in the euro zone deteriorated significantly at the end of last year. Compared with the previous month, the indicator fell by 2.3 points to 115.3. In the services sector in particular, the tightening of pandemic measures in many countries caused a downturn.

Economic Indicators January 10

MEZ Country Indicator Last period
10:30 EZ Sentix Economic Outlook (January) 13.5
11:00 EZ Unemployment Rate (November) 7.3%


Earnings Calender January 10

Country Company Period
GE Munich Re Natural disaster balance 2021


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
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Source: LGT Bank (Switzerland) Ltd.

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