The employment numbers from the private sector of the USA are finally here and have shown a negative side of the labor market. During the month of November, around 127,000 jobs were added to the US economy by the private sector. But the markets were actually expecting a reading of 200,000, which means that the recent reading was a bearish surprise for many.
As a result of this poor reading from the US labor market, the US dollar index remained negative and was last seen trading below 106.50.
The data was published by the ADP (automatic data processing) and highlighted the current condition of the US labor market. Although the new jobs added to the economy were far fewer than the market's expectation, there was still a piece of good news. On a yearly basis, the pay increased by 7.6%, which will be good for the consumers.
However, let's not forget that the current inflation rate in the USA is standing at 8.5%! So a pay increase of 7.6% is still not even enough to cover the inflation, let alone increase consumer spending. But as they say, even a little bit of support is better than no support at all.
As for the reason why the US labor market is in this condition, experts believe that this has to do with the Fed. For starters, the tightening policy of the Fed is negatively impacting job creation and is also hurting pay gains. And for the case of the Fed, they are doing all of this to curb inflation.
So in a sense, the US economy has become stuck in a vicious cycle of inflation and a slowing economy. Trying to work on either of the problems will escalate the other!
Another factor to consider is that US companies are not in the mood for hyper-replacement. As a result, far fewer people are quitting their jobs!