In Markets "In a Nutshell"

Markets “In a Nutshell” for September 5, 2023

Investment Week at a Glance

Stocks finished up for the week.  The Dow Jones Industrial Average rose 1.40%, the S&P 500 was up 2.50%, and the NASDAQ rose 3.20%. Foreign stocks (MSCI EAFE) were also up, rising 2.70%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 4.18%.  (Data source: Wall Street Journal)

Labor Market Cooling

Job openings and quit rates are now at their lowest since the beginning of COVID-19 in March 2020. Job openings have fallen to about 8.8 million after reaching a peak of roughly 12 million 18 months ago. The unemployment rate is also on the rise as it went from 3.5% to 3.8% in the most recent report. U.S. labor force participation is also on the rise at 62.8% which is the highest since Covid as well. While this data is not positive for the labor market, it does show the Fed that the economy is slowing down which makes it less likely we see any more rate hikes. Overall, the labor market is still strong historically and wage growth is now above inflation which provides some cushion for the consumer.

What This Means For The Fed and Markets

The Fed has been targeting a cool-off in the jobs market and slower wage gains by hiking rates and it is now seeing this happen. The Fed’s last set of economic projections showed unemployment rising to a peak of 4.5% this cycle which is still a historically healthy labor market. The market is currently pricing in no more rate hikes, and rate cuts beginning in May of 2024. A pause in hikes and eventual cuts could help boost the market and if rates fall, bond returns will increase while rates fall. Despite a shaky August, the S&P 500 only fell about 2% over the course of the month and remains up 17% for the year.



What is considered a healthy unemployment rate for the economy? (Scroll Down for Answer)

  1.     0%-1%
  2.     1%-3%
  3.     3%-5%
  4.     5%-7%





















































Answer below.



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3.   3%-5% is considered to be a healthy unemployment rate and is seen as full to most economists. This level of unemployment is thought to prevent inflation and move between jobs but low enough for most people to find full time employment if they want.