On Friday, we were able to learn about the US labour market report. The data turned out to be better than forecast. Non-farm employment for the largest economy rose by 223,000 when analysts had expected an increase of 200,000. This is a continuation of uninterrupted employment growth since February 2021. What could this mean for financial markets and individual sectors?
US strong despite growing slowdown
Following the release of the report, the main S&P 500 index (US500) rose by 1.2% in a single session. The US unemployment rate fell to 3.5%. Average earnings rose by 3.09% y-o-y. and virtually unchanged since the last monthly reading. Wages increased the most in three sectors: mining (up 7.0% y/y), information (up 4.9% y/y) and professional and business services (up 4.6% y/y). It seems that we could see the growth of the former from, among other things, the valuation of the Energy Select Sector SPDR Fund (XLE), which replicates the sector's listing.
Source: Conotoxia MT5, XLE, Weekly
The only sector where average earnings fell by 0.23% y-o-y in nominal terms despite high inflation is retail trade. This proves that, despite the fastest-growing inflation in the United States for this century, on average, a citizen's real earnings fell by 3.8% year-on-year.
The situation is similar for employment issues. The largest 3 increases we could see in: Mining (up 9.2% year-on-year), Leisure and Hospitality (up 6.4% year-on-year) and Information (up 5.6% year-on-year). There was no sector where we did not see employment growth. On a month-on-month basis, 68% of industries recorded an increase in employment, which may be indicative of a relatively healthy economy. What may seem interesting is that the leisure and hospitality sector, which had the worst performance relative to sectors in the United States, was on the podium. The Consumer Discretionary Select Sector SPDR (XLY) fund's listing was down more than 37% at 2022.
Source: Conotoxia MT5, XLY, Weekly
Which industries are growing fastest and which are reeling?
The industry whose employment increased by 1.7% during the month (up 15% year-on-year) is auxiliary mining activities. This includes mineral exploration, mine dewatering, drilling and other support activities. Types of these activities include support mining of coal, metals and non-metallic minerals. It appears that this may be due to the effect of increased spending by major mining companies on new investments related to rising prices of coal or oil, among others.
In second place was the entertainment, gaming and leisure industry, which increased employment by 1.4% m/m. (up 8% year-on-year). This seems to have a positive impact on the Roundhill Sports Betting & iGaming ETF (BETZ) listing.
Source: Conotoxia MT5, BETZ, Weekly
Interestingly, one of the industries hit hardest by job cuts is electronics and appliance shops, with a 0.7% m/m drop in hiring. (down 7% year-on-year). It seems that as consumers' real wages are declining, they are holding off on possibly replacing TVs, washing machines or fridges.
Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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