A Happy New Year? U.S. Job Growth Slows While Markets Soar

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U.S. December jobs report: Weaker than expected

During the month of December, the U.S. added 148,000 jobs, Eibel said, coming up a little short of consensus expectations. However, he stressed that investors probably shouldn’t read too much into the numbers, as winter months like December tend to see more volatility in job creation due to rough weather. As proof, he noted that financial markets were seemingly unaffected by the employment report, with no real change in direction or movement. “The main thing to focus on instead is wages, which were solid, with average hourly earnings in December increasing to 2.5%, year-over-year, according to the Labor Department,” Eibel said.

Going forward, he and the team of Russell Investments strategists expect the U.S. economy to add approximately 160,000 jobs per month—slightly less than in 2017, Eibel said, due to the nation’s low unemployment rate.

Strong start for U.S. markets in January

Zooming in on the performance of U.S. equity and bond markets during the opening week of the year, Eibel said 2018 picked up right where 2017 left off. “Today feels like December 36th,” he quipped, “with the same positive trends we saw all of last year continuing.” Markets are being driven upward, Eibel said, by a slew of strong economic data. “Whether it’s manufacturing numbers, construction numbers, or non-manufacturing numbers—you name it, the trend is good in the U.S.,” he remarked. In addition, Eibel believes that the recent passage of the U.S. tax reform bill is also propelling markets forward. “While we don’t know what impact the new law will ultimately have on the economy, there’s a hope among many investors that it could deliver on all its promises,” he said.

What could potentially offset all this good news? The continued relatively high valuations in the U.S. equity market, which in Eibel’s viewpoint are a bit of a concern. “There seems to be an ongoing battle between this and the steady stream of good economic data,” he said—“but right now, the bullish case is beating the bearish case.”