Finimize - 👨‍🏭 Jobs misfired

What’s going on here?

The US jobs market didn’t overleap expectations last month, with new jobs coming in under the bar instead.

What does this mean?

Economists have been playing and losing a high-stakes game of pin the tail on the donkey with US jobs data – undershooting the mark for 14 straight months. But Friday’s data was a game changer: the US economy added a mere 209,000 jobs in June. That not only missed forecasts but marked the slowest pace of job creation since we bid adieu to 2020. And to add a dash of extra sweetness to the mix, job numbers for April and May were revised down by a combined 110,000. That good news might mean that interest rate hikes by the Federal Reserve (the Fed) are finally cooling down the red-hot jobs market.

Why should I care?

For markets: Fed’s foresight.

A slowdown in job creation might just be the plot twist the Fed was hoping for when it hit pause on its interest-rate-hike marathon last month. But the million-dollar question is whether this will prompt a change in the Fed’s playbook. Most are betting that one data hiccup like this won’t be enough to sway plans, especially as the wage growth slowdown seems to have hit a plateau. In fact, markets are still putting their money on a 90%-plus chance of another rate hike later this month. Still, though, if the data keeps trending in this direction, the Fed could well change course down the line.

The bigger picture: Working 9 to 5.

Keep an eye on working hours. Businesses, especially those that have struggled to hire, often deal with tough conditions by cutting hours before resorting to layoffs. And lately the average workweek has been sliding toward the lower end of its historical range – prompting some economists to warn that we could see a surge in layoffs if it dips much further.

What’s going on here?

Samsung Electronics admitted it ran aground on the rocky shores of the global chip market on Friday.

What does this mean?

Samsung likes to give investors a sneak peek before its full results come out, and this time, the update was more like a warning than a promise. See, the $160 billion global memory chip industry is going through a rough patch, with consumers and businesses tightening their purse strings – and that’s put a damper on chip sales worldwide.

According to market research, that drop in demand dented chip prices by as much as 18% last quarter, so it’s no surprise Samsung reported a likely 22% drop in sales compared to the same time last year. And here’s the kicker: operating profit fell a staggering 96%, marking the company’s lowest profit since 2009. And while that’s somehow better than what pessimistic analysts were expecting, it’s still a tough pill to swallow – and shares took a predictable hit.

Why should I care?

The bigger picture: What goes down, might come up.

There is some optimism floating around, mind you: industry peers like Micron and SK Hynix think the industry might be bottoming out. And some analysts are latching onto that idea, expecting Samsung’s profit to bounce back in the second half of the year. After all, the rise of AI could be a game-changer: AI servers need up to six times the memory capacity of standard ones, which could give the market a much-needed boost.

Zooming out: Bigger’s not always better.

Despite the hurdles, Samsung has managed to shine on South Korea’s Kospi index this year. But not everyone’s sold: one of the country’s top funds, for instance, is avoiding Samsung and eyeing smaller Korean suppliers of chip materials and equipment instead. And it seems that strategy is working so far: the underdog stocks have outperformed the Kospi, helping catapult the fund ahead of 99% of its peers this year.