Astonishingly strong US jobs report sends stocks wavering

By Paul R. La Monica, CNN

Updated 4:27 p.m. ET, February 3, 2023
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4:24 p.m. ET, February 3, 2023

Mortgage rates were falling. The jobs report will likely change that

From CNN's Anna Bahney

Homes sit on lots in a neighborhood on January 26 in Pembroke Pines, Florida.
Homes sit on lots in a neighborhood on January 26 in Pembroke Pines, Florida. (Joe Raedle/Getty Images)

Mortgage rates will likely rise following the January jobs report shocker, housing experts said Friday. US Treasuries jumped higher after the monthly employment snapshot was released — and where Treasuries go, mortgage rates tend to follow.

With a stronger jobs picture comes more people spending more money, and that's going to make the Fed more likely to raise rates in an effort to curb that inflation. Until inflation is under control, mortgage rates will remain volatile.

While the Fed does not set the interest rates borrowers pay on mortgages directly, its actions influence them. 

Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed's actions, what the Fed actually does and investors' reactions.

When Treasury yields go up, so do mortgage rates; when they drop, mortgage rates follow them down as well.

Job gains are always good for the housing market, said Lawrence Yun, chief economist at the National Association of Realtors.  

"Home sales and jobs are related over the long term," he said. "That is why the South and the Rocky Mountain regions are seeing more robust home sales gains over the long haul due to faster job growth compared to the rest of the country." 

But in the short term, he said, mortgage rates matter more, and there could be a temporary rise. 

The strong job data will raise the prospect of consumer price inflation and the need for a more aggressive monetary policy to rein in inflation, Yun explained. As a result, just as mortgage rates were drifting down towards 6%, they could turn around.

"Still, rents are expected to calm down due to active apartment construction," said Yun. "That will help lower the broader consumer price inflation and halt Fed rate increases by summer. Mortgage rates can then go below 6%." 

4:27 p.m. ET, February 3, 2023

Stocks drop as strong jobs report fuels more rate hike fears

From CNN's Paul R. La Monica

Traders work on the floor at the New York Stock Exchange on Feb. 1.
Traders work on the floor at the New York Stock Exchange on Feb. 1. (Seth Wenig/AP)

US stocks fell Friday after shockingly good jobs numbers sparked more concerns that the Federal Reserve may need to keep raising interest rates for a longer period of time in order to fight inflation. 

Investors were also disappointed by earnings from several blue chip companies, such as Amazon (AMZN), Google owner Alphabet (GOOGL), Ford (F) and Starbucks (SBUX). 

The Dow was down nearly 130 points, or 0.4%. 

The S&P 500 ended the day 1% lower. 

The Nasdaq Composite lost 1.6%.

The market still enjoyed a strong week, however. The S&P 500 rose nearly 2% and the Nasdaq was up more than 3%. The Dow was flat.

Wall Street was encouraged that the Fed raised rates by only a quarter-point on Wednesday. Solid results from Facebook and Instagram owner Meta Platforms (META) also boosted market sentiment this week. 

As stocks settle after the trading day, levels might still change slightly.

3:03 p.m. ET, February 3, 2023

Stocks broadly lower in choppy session after jobs report

From CNN's Paul R. La Monica

It's been a topsy-turvy day on Wall Street. The market is currently leaning toward the turvy side.

Stocks opened lower following the strong jobs report, only to rally by late morning. But those gains are now gone. The Dow — which was up more than 125 points just before noon — was down about 200 points, or 0.6%, with about an hour left in the trading day.

The S&P 500 fell 1.2% in late afternoon trading, while the Nasdaq Composite was off by 1.7%.

It seems investors have once again come to the realization that the labor market remains fairly robust. Despite high-profile job cuts and layoff announcements in the world of tech and media, many American employers are still hiring.

What's more, wages are rising, which should continue to fuel inflation pressures and justify more rate hikes from the Federal Reserve. Hence, the good jobs news is bad news for the market.

Also playing into the sell-off: weak earnings from tech behemoths Amazon (AMZN) and Google owner Alphabet (GOOGL). Alphabet was down 3% Friday while Amazon tumbled 8%. But Apple (AAPL) rebounded, with shares gaining 3% even though it reported lackluster results.

12:24 p.m. ET, February 3, 2023

Latest jobs report shows even more growth than you think

From CNN's Chris Isidore

The news that employers added 517,000 workers in January is only part of the strength in the US jobs market.

The Labor Department also issued revisions of jobs numbers over the past two years, as it does every time it issues a January report. And this time, the revisions were also huge.

The revised numbers show that employers had a total of 154.6 million workers on payrolls at the end of 2022. That's 813,000 more workers than the previous reading.

Much of that gain came in late 2021 and early 2022. In the 12 months ending in March of last year, there were 7.1 million jobs added as the economy recovered from the hit it took during the pandemic. That's 617,000 more jobs than the Bureau of Labor Statistics had previously been estimated had been added during that 12-month period.

12:35 p.m. ET, February 3, 2023

517,000 jobs created is "stunning number says ADP's Chief Economist

Construction workers work on a building in Philadelphia, on Dec. 21, 2022.
Construction workers work on a building in Philadelphia, on Dec. 21, 2022. (Matt Rourke/AP)

The Chief Economist of ADP, Nela Richardson, told CNN the 517,000 jobs created in January was "a stunning number" and that "there was nothing in the last three months of US jobs gains that would have prepared you or me for a number that was above half a million jobs created in a single month."

The U.S. jobs report far exceeded expectations while the unemployment rate fell to a historic low of 3.4%.

Speaking to Zain Asher, Nela Richardson went on to say that to "see a year's worth of interest rate hikes, many of them which are quite aggressive translate into a number that is this strong, spells a question for the Fed." She said the Federal Reserve has its work cut out for it to understand what's going on in the jobs market.

12:44 p.m. ET, February 3, 2023

UK’s FTSE 100 closes at record high

From CNN's Anna Cooban

London's FTSE 100 stock index closed at a record high on Friday, boosted by strong employment data from the United States. 

The index jumped 1.04% on Friday to hit 7,901.8 points — its highest level ever — beating its previous record set in May 2018. 

The index, which is made up of the 100 most valuable companies listed in London, rose as the pound fell 1.2% against the dollar on the back of the bumper US jobs report.

Many companies in the index generate their profits in US dollars, so a weaker pound boosts profits. 

The FTSE has rallied 6% this year as China has reopened its economy, boosting prospects for its companies' exports, and as inflation in the United States and Europe has ticked down. 

Companies in the index include big banking groups, and mining and energy firms. Oil giant Shell was one of the day's biggest movers, gaining 3.7% just one day after it posted a record $40 billion in profit for 2022. 

Michael Hewson, chief market analyst at CMC Markets, told CNN the FTSE 100 could "potentially push on to 8,000 in the coming days and weeks," should interest rates remain at their current levels. 

The gains come amid uncertainty for the UK economy. On Tuesday the IMF warned that the UK would be the only major economy to contract this year. Then, on Thursday, the Bank of England raised UK interest rates by half a point to 4% as it continues to fight high inflation. The central bank said UK inflation was likely to fall sharply over the rest of the year, but warned of significant uncertainty over its forecasts.

— Robert North contributed reporting. 

1:36 p.m. ET, February 3, 2023

Want to see strong job growth? Go out to eat

From CNN's Chris Isidore

A busy dining room at Harveys Restaurant on January 11 in Falls Church, VA.
A busy dining room at Harveys Restaurant on January 11 in Falls Church, VA. (Scott Suchman/The Washington Post/Getty Images)

One of the stronger sectors in the unexpectedly robust January jobs report: Restaurants and bars.

That sector added about 99,000 jobs compared to December — representing nearly 1 out of 5 of the total jobs added in January overall.

It was the restaurant-and-bar world's biggest one-month job gain since February 2021. And it adds to several months of good job growth in the sector recently, as it has added at least 87,000 jobs in four different months since July.

Despite that, the sector remains 166,000 jobs below the record employment level reached in February of 2020, right before pandemic shutdowns caused employment in the sector to crash.

In March and April of 2020, 6 million jobs were lost at restaurants and bars — nearly half of all jobs in the sector, and 27% of the job losses suffered across the entire US economy. While overall employment got back above pre-pandemic levels in June 2022, it'll take a little while longer for restaurants and bars to recapture all the positions lost in the early-pandemic days.

A big part of the problem: Employers are still having trouble finding workers. A separate Labor Department report shows that in December, there were 1.7 million unfilled job openings in the hospitality sector that combines both accommodations and food services industries.

That's the second-largest number of openings in that space in history, only slightly below record 1.8 million openings a year earlier. It's also roughly triple the average number of openings in those industries over the 10 years before the pandemic.

2:09 p.m. ET, February 3, 2023

Markets look for direction in midday trading

From CNN's Nicole Goodkind

US stocks plunged lower on Friday morning as traders digested a much stronger than expected jobs report for January, but recovered a bit by midday trading.

The steep drop came after jobs numbers showed a much stronger than expected labor market and added to investor fears that the Federal Reserve will continue with its painful rate-hiking regimen through the year.

Despite the down day, the Nasdaq Composite is off to the best start to the year since 1975. The S&P 500 is trading near its highest levels in five months.

All major averages are also on track for a positive week. The S&P 500 gained more than 2% this week. The Nasdaq Composite is up about 4% and is likely to notch its fifth consecutive winning week. The Dow is also higher this week, by about 0.4%.

The Dow was up 21 points, or 0.1%, on Friday afternoon. 

The S&P 500 fell by 0.4%. 

The Nasdaq Composite was 0.3% lower.

12:18 p.m. ET, February 3, 2023

Blockbuster jobs report should 'dash' recession fears, says Moody’s chief economist

From CNN’s Kate Trafecante and Matt Egan 

People walk past the New York Stock Exchange during morning trading on January 26 in New York City.
People walk past the New York Stock Exchange during morning trading on January 26 in New York City. (Michael M. Santiago/Getty Images)

The January jobs report should "dash" concerns of recession, Moody's chief economist said Friday, but warned that the numbers may overstate job growth.

"Any concern the economy is in recession or close to a recession should be completely dashed by these numbers," Moody's Chief Economist Mark Zandi told CNN’s Matt Egan on Friday, adding that it would take "an awful lot" to send the US economy into a downturn.

"There is no indication this labor market is going to give up and start suffering job losses anytime soon. Businesses just do not want to lay off workers," Zandi said. Companies are likely staffing up, he noted, since their number-one problem after any slowdown "will be finding and retaining workers.”

However, despite the blockbuster January number, Zandi said he is concerned the total number of jobs may be overstated — predicting the labor market is not quite "500K strong — it’s probably 250K strong.”

The issue likely lies with the Bureau of Labor Statistics and how it adjusts for seasonal swings. Zandi said the agency has had issues since the pandemic, when the economy shut down and reopened.

“It’s just so boom-like, so out-of-bounds, that it doesn’t seem credible to me," Zandi said. "This winter has been warm, allowing for more jobs in construction, retail, leisure and hospitality."

"You get one of these out-of-bounds jobs reports every year or so. This is one of those reports. I just don’t put any weight on it,” Zandi added.