When we talk about job report influencing the stock market, we are almost talking about the status of the economy influencing the stock market.
While the job report isn’t the same as the economy, it is a good indicator of how the economy is doing. For instance, if you’re considering betting in the stock market through leading offshore sportsbooks, understanding the U.S. jobs report is crucial.
The job report is also significant in and of itself because of what it describes – about jobs, of course.
Spoiler alert: the relationship between how people are doing in terms of jobs and the stock market is more complex than you might assume.
What Is the U.S. Job Report?
Also referred to as the employment report, the job report is a report for which our BLS (Bureau of Labor Statistics) is responsible. It comes out every month and relies on statistics to describe the condition of American workers.
CNBC: Today’s blowout jobs report shows that the U.S. economy added 353,000 jobs last month. That’s far better than economists’ estimates pic.twitter.com/g8GZ5Uxe1C
— Biden-Harris HQ (@BidenHQ) February 3, 2024
To understand what this report tells us about workers, you should note that it is based on two surveys, each of which contains information about different things and which combine to create a meaningful picture of how the economy is doing.
Current Population Survey
One survey is called the Current Population Survey. It is also referred to as the household survey.
As the name implies, it is sent to households.
The BLS refers to this survey as specifically addressing the “civilian noninstitutional population.” This includes the self-employed as well as agricultural workers.
Excluded from the report are people in institutions, such as nursing homes, prisons and kids who are below the age of 16.
The most well-known statistic yielded by this survey is the national unemployment rate.
It measures the proportion of the labor force that is unemployed as well as the proportion that is not employed but is available to be employed and has made some recent effort to become employed or has been released from employment on a basis that is merely temporary.
While it only surveys 60,000 households, these households are supposed to be representative of the entire targeted population in the nation.
In the background of the headline unemployment rate hovering around 3.6% last year, the black-white employment population ratio gap closed, quite rapidly, to 0.3%, its lowest level in Current Population Survey history pic.twitter.com/3aAimLlL8a
— Preston Mui (@PrestonMui) March 24, 2023
Questions to be found on this questionnaire target details about things like what one does every year for work, what one’s income is, whether one is a veteran, whether one holds multiple jobs and so on. It does not include, however, how much are you cashing at the top-rated sportsbooks.
One person, typically the owner of the household, will respond to these questions for the entire household.
Current Employment Survey
The second survey distributed by the BLS is also referred to as the payroll survey or the establishment survey.
This survey targets government agencies and businesses, reaching about 145,000 of them. It is interested in industry and the private sector. Examples of industries include construction and manufacturing.
What this survey tracks is how many hours these particular people are working over time and how much these workers are earning per week.
A Possibly Negative Relationship
In one’s own mind, one is inclined to associate a strong job report with a good economy because an active labor force is fundamental to the functionality of an economy.
People therefore assume that a positive job report would create a correspondingly positive impression on investors – one would think that strong indicators of a healthy economy are something Wall Street would like.
While the creation of jobs isn’t, precisely speaking, directly going to pose a problem for investors, what does become problematic is when there are more jobs available than workers.
When there are more positions to be filled, then employers will offer better wages both to potential new employees and to current employees whom they hope to retain.
When people make more money, then they also spend more money. More spending creates difficulty in the supply. Because there is more demand, businesses will raise prices.
Higher wages and higher prices make it difficult to lower inflation. The Fed, which targets lower inflation as part of its function, will respond by increasing companies’ expenses by forcing them to pay greater interest.
When companies are paying higher interest rates, they are profiting less – because greater expenses mean lower profit. If companies are not doing so well, then investors are going to lose confidence in them.
Not Always The Case
Of course, as one would expect, a strong job report does not necessarily entail a problematic stock market situation.
If workers’ wages are not growing so significantly, for example, then we might not see this problem of companies being so eager to raise prices, whereas if companies do raise prices by a large amount, then it is a sign that spending will decline – people respond to very high prices by spending less money – which investors do not like to see.
So, the relationship between the job report and stock market is not a simple one.
As this example of workers’ wages not growing too strongly shows, we are in the world of degrees: a great job report could spell trouble for the stock market, whereas a somewhat great one could be good.
