The Federal Reserve chairman slammed stocks Wednesday afternoon when he said a Fed rate cut in March was unlikely. But otherwise his comments were mild.
“We don’t view stronger growth as a problem,” Fed Chief Powell said. “We have six months of good inflation data.”
Powell specifically emphasized that “we are not looking for a weaker labor market.”
At the time, that comment didn’t seem crucial. Earlier on Wednesday, the ADP Employment Report estimated that private wage growth slowed to just 107,000 in January.
But Friday’s jobs report told a different picture. The U.S. added 353,000 jobs last month, the Labor Department said, more than twice as many as expected. Average hourly wages rose 0.6% compared to December, double the forecast.
While there are reasons to question the magnitude of job and wage gains, the report indicated significant economic and labor growth.
And yet, Wall Street took Friday’s jobs report positively. The major indexes opened mixed but quickly moved higher, with the S&P 500 and Dow Jones hitting record highs and the Nasdaq just hitting a two-year high.
Clearly, Meta Platforms, Amazon and other big tech companies were ahead of the curve on Friday. The Nasdaq rose 1.7%, while the Russell 2000 fell 0.5%. The Invesco S&P 500 Equal Weight ETF (RSP) fell 0.1%, although it rose 0.4% this week, near a 52-week high.
But without Fed chief Powell’s comments on economic growth and especially labor markets, the January jobs report could have had a sharp negative impact.