Why are investors so jumpy?
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Why are investors reacting so dramatically to market changes?
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Pushkin. Stocks are down, way down. No, wait, this just in, they're up. No, they're down again. Wait, no, they're definitely up now. Today on the show, some zigzags in the equity markets and other markets too. This is Unhedged, the markets and finance podcast from the FT and Pushkin. I am Rob Armstrong coming to you from New York City, where it's not just markets that are volatile. It is my internal emotional state. I can't handle all this zigging and zagging. I am joined down the line from London by Dara McFadden, the newest member of the Unhedged team. Dara, are you managing to remain calm in the face of all of this? I'm reverting to the mean, Rob. That is the spirit. So we've had an absolutely wild couple of days in markets, Dara.
Friday, abysmal. Monday, starts strong and then sags drearily. And as of recording time today, we look like we might have a good one. What is all this chaos, Dara, and where did it begin?
Let's go back to Friday. Friday was bad. And the reason it was bad was a jobs report that was actually quite good. So in the US, one of the key economic indicators we pay a lot of attention to is the non-farm payrolls that comes out from the Bureau of Labor Statistics once a month. Last Friday, we got the report for the number of jobs created in May of And it came in far above expectations. There were 172,000 jobs created, more than double the market was expecting.
And what's amazing about this to me is that if we were talking on this show four months ago, we would be talking. And I'm sure, by the way, we did talk four months ago about how the kind of equilibrium level of U.S. job creation was zero. Right. Working age native born population not growing. Donald Trump cuts off the immigration flows. America can have a stable unemployment rate with no jobs added. And here we are. This is the third report in a row. We're adding, you know, 100,000 jobs or even more. It's an amazing turnaround in some way.
Yeah, there's something kind of weird about that, actually. 55,000 of the jobs that were created in May were government jobs. And that's not normal. Normally, we'd expect to see around 14,000 jobs a month in government. But for some reason, this time around, there was this very heavy contribution from government.
What are they all doing, all these government employees? Are they coming to spy on us? Who are these people? If you know, listeners, let us know. But in any case, big spike in government jobs. You know, when you see a good jobs report, what you want to see is not non-cyclical jobs in places like government or health care. What you want to see is job growth in the cyclical sectors, construction, say, or finance, something like that. And we did get some of that, didn't we?
Yeah, so in that respect, it actually did pretty well. There were 70,000 new jobs created in leisure and hospitality. Some of that is probably that we're heading into the summer season. We've got the World Cup starting in the U.S. very soon.
Understood. A pretty good jobs report, the third pretty good jobs report in a row. Explain for the benefit of our listeners the thing that puzzled them, perhaps, and certainly the President of the United States. How is it that a good jobs report – means markets go down.
Well, yeah, the market reaction just got a bit silly, in my opinion. And partly that's because if you have a jobs report coming in that more than double the market expects, that suggests that the economy might be re-accelerating. Things are heating up. More people are going to have more disposable income, and that's going to contribute to inflation.
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