{"id":12422,"date":"2023-05-09T00:50:00","date_gmt":"2023-05-09T00:50:00","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12422"},"modified":"2023-05-05T02:56:43","modified_gmt":"2023-05-05T02:56:43","slug":"fed-raises-rates-again-u-s-job-market-cools-manufacturing-contracts-services-steady","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/fed-raises-rates-again-u-s-job-market-cools-manufacturing-contracts-services-steady\/","title":{"rendered":"Fed Raises Rates Again, U.S. Job Market Cools, Manufacturing Contracts, Services Steady"},"content":{"rendered":"\n<p>In this week\u2019s Steady Investor, we take a look at some of the current events that are shifting the market, such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Fed raising rates, again<\/li>\n\n\n\n<li>U.S. labor market showing signs of cooling<\/li>\n\n\n\n<li>U.S. manufacturing market status<\/li>\n<\/ul>\n\n\n\n<p><strong>The Fed Raises Rates Another 25 Basis Points, But Signals a Pause \u2013 <\/strong>At the Federal Open Market Committee (FOMC) meeting this week, the Fed announced its 10<sup>th<\/sup> consecutive rate increase, bringing the benchmark fed funds rate to a range between 5% to 5.25%. All told, the Fed has now hiked the benchmark rate from the zero bound to 5% in just over one year, marking the fastest pace of rate increases since the Volcker Fed aggressively battled inflation in the early 1980s. The market was pricing in this 25-basis point increase, but expectations have also been set that this would be the final rate increase in 2023. Stress in the banking sector \u2013 which has been tied to the impact of rising rates on fixed-rate securities on bank balance sheets \u2013 only adds to the thesis that the Fed will pause to monitor how inflation and credit conditions in the economy evolve over the next several months. Previously, Fed Chairman Jerome Powell had been looking for clear signs of an economic slowdown and weakness in the labor markets to justify pausing the rate hike campaign. Today, the Fed has shifted to monitoring the economy for stronger-than-expected growth, hiring, and inflation as an impetus to continue raising rates. In the Fed\u2019s policy statement, they dropped a key phrase from March\u2019s meeting whereby they \u2018anticipated\u2019 that additional increases may be appropriate. May\u2019s statement instead contained new language indicating the Fed would now shift to monitoring the economy to gauge the effects of previous rate increases. Chairman Powell noted: \u201cThat\u2019s a meaningful change, that we\u2019re no longer saying that we \u2018anticipate\u2019.\u201d The next FOMC meeting is on June 13-14.<sup>1<\/sup><\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/retirement-uncertainties-guide?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_2023_05_08&amp;content=retirement_uncertainies_guide\">How Can You Prepare for Retirement Uncertainties?<\/a><\/u><\/strong><\/p>\n\n\n\n<p>When preparing for retirement, especially in volatile times like these, taking the \u2018what-ifs\u2019 into account can keep you uncertain about your future financial decisions.&nbsp; What if inflation eats into your retirement? What if you run into more expenses during retirement than you\u2019d expected?<\/p>\n\n\n\n<p>To help, we\u2019re offering practical advice that is based on decades of experience and can potentially guard your retirement assets against the \u201cwhat ifs\u201d in life, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How to counteract the effects of rising inflation<\/li>\n\n\n\n<li>Ideas to allocate your assets to defend against a correction or crash<\/li>\n\n\n\n<li>Strategies to deal with financial emergencies without liquidating investments<\/li>\n\n\n\n<li>Tax planning ideas to help avoid unpleasant surprises<\/li>\n\n\n\n<li>Plus, more ways to help protect yourself and your family against retirement unknowns<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest<a href=\"https:\/\/go.steadyinvestor.com\/retirement-uncertainties-guide?source=zim&amp;medium=blog&amp;term=steadyinvestor_zim_2023_05_08&amp;content=retirement_uncertainies_guide\">, <strong><u>download our\u00a0<em>Retirement Uncertainties\u2026and How to Breeze Through.<\/em><sup>2<\/sup><\/u><\/strong><\/a><\/p>\n\n\n\n<p><strong>The U.S. Labor Market Shows Signs of Cooling Off \u2013 <\/strong>The US Labor Department reported that job openings fell in March while layoffs rose, signaling a loosening in the labor market that has largely eluded policymakers over the past year. It may feel a bit odd to cheer the weakening of the US labor market \u2013 after all, shouldn\u2019t we want plentiful open jobs and few-to-no layoffs, i.e., a very tight labor market? In a period of very low inflation, the answer would be yes. But we\u2019re not in a period of low inflation, which means that tightness in the labor market invites wage pressures that translate into price pressures. Consumers are armed with more money to spend, and corporations respond to higher wages by raising the prices of goods and services in order to pad or at least maintain profit margins. Inflation follows. That\u2019s why March\u2019s jobs report was welcomed by investors, with job openings falling to their lowest level in two years (see chart below) and layoffs rising to a seasonally adjusted 1.8 million, up from 1.6 million in February. The leading sectors with layoffs were leisure, hospitality, and healthcare, which were strong drivers of job growth in recent months.<sup>3<\/sup><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"350\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-2-1024x350.png\" alt=\"\" class=\"wp-image-12423\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-2-1024x350.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-2-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-2-768x262.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-2.png 1318w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong><\/p>\n\n\n\n<p><strong>U.S. Factory Activity Contracts, But Services Remain Firm \u2013 <\/strong>The Institute for Supply Management reported April data for the U.S. manufacturing and services sectors, which pointed to a mixed view of economic activity. The manufacturing index was 47.1% in April, which marked the 6<sup>th<\/sup> consecutive month in contraction territory. April was an improvement over March\u2019s activity but nevertheless, points to reduced demand for new orders and manufactured goods. From a macroeconomic perspective, however, manufacturing comprises a much smaller portion of the overall economy than services, which the ISM reported continues to hover in expansionary territory. Services PMI registered at 51.9% in April, marking expansion in 34 of the last 35 months. December 2022 was the single contraction reading, but the economy bounced back to start 2023. Key drivers of service activity have been robust activity in leisure and hospitality, with Americans continuing to travel and eat out. But the building boom has also kept activity firm in expansion, with a wave of apartment building, infrastructure projects, and many semiconductor manufacturing projects underway.<sup>5<\/sup>&nbsp;<\/p>\n\n\n\n<p><strong>Feeling Doubtful About Your Retirement Plan? <\/strong>Just as we cannot predict exactly how the stories above will pan out, we also cannot predict life\u2019s uncertainties when it comes to retirement planning. No matter how carefully you prepare for retirement, life\u2019s unknowns can throw your plans off track. In our exclusive guide, we cover retirement uncertainties, such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The effects of inflation could diminish the real value of your nest egg<\/strong><\/li>\n\n\n\n<li><strong>Changes in your personal situation\u2014such as a health emergency\u2014could have an enormous<\/strong><\/li>\n<\/ul>\n\n\n\n<p>This guide provides advice to help prepare and protect your secure and comfortable retirement. If you have $500,000 or more to invest, get our free guide, <strong><em>Retirement Uncertainties\u2026and How to Breeze Through Them.<sup>6<\/sup><\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Fed announced its 10th consecutive rate hike and signals a pause, job openings fall, factory activity contracts, services continue to expand. <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-12422","post","type-post","status-publish","format-standard","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12422","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12422"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12422\/revisions"}],"predecessor-version":[{"id":12425,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12422\/revisions\/12425"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12422"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12422"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12422"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}