There was a combination of relief and surprise Friday as the world learned that the U.S. economy added 467,000 jobs in January. Many forecasters had expected job losses given how hard the omicron variant of the coronavirus had hit so many communities, forcing schools and businesses to shut or scale back hours.
Businesses and workers showed resilience. Nearly every industry increased hiring, with the biggest gains occurring in restaurants and bars. It’s too early to declare that the pandemic is over, but there are increasing signs that people are learning to live with it, especially those who are vaccinated.
The United States has now gained back 87 percent of the 22 million jobs lost during the pandemic recession. It’s one of the fastest job recoveries on record.
The recovery does come with an asterisk. High inflation is eating up the wage gains for many workers, and there are still millions of workers who have yet to return due to health concerns, child care and eldercare problems, and long-term effects from covid. While the unemployment rate has fallen quickly, this has been the slowest recovery in modern history for labor force participation.
Still, the big takeaway from the latest data is that the U.S. job market is even stronger than we thought. In addition to robust January hiring, it turns out job gains at the end of last year were also much better than initially perceived. There were actually 510,000 jobs added in December (versus a preliminary estimate of 199,000) and 647,000 added in November (versus a preliminary estimate of 249,000). Last month also saw a strong rebound for Black workers and the fastest monthly wage growth so far in the pandemic era.
There was not a winter slump this year, as there was a year ago. A lot of credit goes to the rapid rollout of vaccines, but the American Rescue Plan that Democrats passed early in President Biden’s term also played a role. It boosted growth and gave families, businesses, and local governments the resources to get through the delta and omicron waves of the virus.
There will long be debates about whether the American Rescue Plan was too big. The $1.9 trillion sizes likely played some role in spurring the high inflation the nation now faces, though supply chain glitches and unusually high demand for goods are even bigger drivers of high prices. But what’s also clear is many families are benefiting from this rapid return to work.
The Federal Reserve has committed to fighting inflation and bringing it down to a more normal level. If the central bank can do that — and that’s a big if — without causing many job losses or pushing the economy into a recession, then this recovery will be a major victory for policymakers and the American people.
For now, Mr. Biden should continue to encourage Americans to take advantage of this historic job market. In spite of the latest burst of hiring, there are still 10 job openings for every 6 unemployed workers.
The S&P 500 and Nasdaq Composite jumped Friday to finish their best week of the year, as continued strength in earnings reports extended the tech-led rebound from the January rout.
The broad market index rose 0.5% to 4,500.53, while and the tech-heavy Nasdaq Composite climbed 1.6% to 14,098.01. The Dow Jones Industrial Average inched lower by 21.42 points, or 0.06%, to 35,089.74.
For the week, the S&P 500 was 1.5% higher, and the Nasdaq rose 2.4%. The Dow ended the week up 1.1%. These gains mark the second weekly advances of 2022 for the major averages — which were under pressure last month as worries of higher interest rates dragged down tech names.
Amazon led the S&P’s and Nasdaq’s gains, as it jumped 13.5% on strong quarterly earnings and cloud revenue beats. Friday’s surge was also Amazon’s biggest one-day gain since 2015. Snap rocketed up 58.8%, the day after reporting earnings. Pinterest rose 11.2%.
“We’re in for a choppy period but tech has been picked on for quite some time, and now, a lot of traders are saying this is the time to be constructive, especially on some of these companies that have proven time and again that they’ve been able to manage different types of environments and are providing optimistic outlooks going forward,” like Amazon, Apple, and Alphabet, said Edward Moya, the senior market analyst at Oanda.
Traders on Friday also weighed a much stronger-than-expected jobs report and its potential impact on U.S. monetary policy going forward.
The 10-year Treasury yield jumped above 1.9%, hitting its highest level since December 2019, after the January jobs report showed a 467,000 gain in payrolls. Economists polled by Dow Jones had expected a minor gain of 150,000, and some economists predicted a large decrease. Economists had cautioned before the report that it could be noisy because of an omicron wave hitting while the survey was taking place.
“For markets, the jobs report is all about the Fed, and today’s upside surprises in both job creation and wage growth keep the Fed on track to begin raising rates in March and hike four or more times this year,” said Barry Gilbert, asset allocation strategist at LPL Financial.
The benchmark yield has jumped from 1.51% at the end of 2021, as the Federal Reserve pivoted to more aggressively fight inflation, signaling it would slow down its bond-buying and raise rates several times this year. Higher rates have weighed on stocks, especially tech shares with high valuations. The S&P 500 is down more than 5% this year.
Wall Street was coming off a horrid session in which a plunge in Meta shares dragged mega-cap tech stocks lower. Meta shares suffered their worst day ever on Thursday, dropping 26.4% on the back of disappointing quarterly earnings.
The Nasdaq Composite, which is tilted towards tech shares, fell 3.7% on Thursday for its worst daily performance since September 2020. The S&P 500 had its worst day in nearly a year, sliding 2.4%, and the Dow fell 518.17 points.
The sharp drop in Meta Platforms, as well as that of Netflix after its earnings last month, could signal weakness under the surface and have bearish implications for the market, according to Adam Sarhan, CEO of 50 Park Investments.
“Some of the mega-cap tech stocks are trading almost like penny stocks. That is a massive shift under the surface from an overtly bullish market, to a market that could be topping and or the beginning of a bearish phase on Wall Street,” he said.
“For the first time since Covid, we’re seeing a massive, almost 180-degree shift where even if we have grown and strong numbers, stocks are no longer blindly, wildly going up. Instead, they’re going down.”
Facebook's parent company, Meta Platforms, just did a face plant on Wall Street.
Shares of the social media giant were down more than 26% Thursday, the first day of trading after Meta reported a decline in profit and users during the last three months of 2021 – and most tellingly, forecast revenue declines in the current quarter.
Meta's market value fell more than $230 billion to a market capitalization of about $661 billion. The company's market cap had been $898.5 billion early Thursday.
The loss is the largest one-day decline in U.S. history, The Wall Street Journal reported.
Last summer, when the company was still known as Facebook, the company became only the fifth U.S. company to achieve a market value surpassing $1 trillion – the others being Apple, Microsoft, Amazon, and Google parent Alphabet.
Meta Platforms' shares closed Thursday at $237.76, down about 26%. The stock price was up more than 1% in aftermarket trading to $240.60.
Shares of Meta, which will change its trading symbol on Nasdaq from "FB" to "META" in the first half of this year, are down nearly 30% so far this year.
Facebook co-founder and Meta CEO Mark Zuckerberg personally lost nearly $32 billion Zuckerberg is the largest individual Meta shareholder, with more than 374.8 million shares, or about 12.5% of total shares outstanding, according to S&P Global Market Intelligence.
Zuckerberg's shares had been valued at $121 billion before the market opened Thursday. When the markets closed, his holdings were worth $89.1 billion.
Zuckerberg, who has been No. 7 on Bloomberg's Billionaires, had already seen a decline of $4.9 billion in 2022.
Meta stock plummets, what some lost
Many of the top Meta shareholders who took losses, too, on Thursday will be familiar as many Americans have investments including 401(k) plans with them:
- The Vanguard Group, which holds 182.9 million shares, , saw its value drop to about $43.5 billion from $59 billion.
- BlackRock (nearly 155.9 million shares): down to $37.1 billion from about $50.4 billion.
- Capital Research and Management Co. (Capital Group/American Funds; nearly 137 million shares): about $44.3 billion from about $32.6 billion
- FMR LLC (Fidelity Investments; 123.8 million shares): about $29.4 billion from about $40 billion.
- UBS Asset Management (20 million shares): about $4.8 billion from about $6.5 billion.
- Fisher Investments (7.6 million shares): about $1.8 billion from about $2.5 billion
- California Public Employees Retirement System (5.7 million): $1.36 billion from $1.8 billion.
- New York State Common Retirement Fund (5.47 million): $1.3 billion from $1.77 billion.
- Sheryl Sandberg, Meta COO (1.42 million shares): $337.6 million from $458.7 million.
- North Carolina Department of State Treasurer (1 million): 237.8 million from $323 million.
- Marc Andreessen, Meta independent director (44,434 shares): $10.6 million from $14.4 million.
- Peter Thiel, Meta independent director (12,947 shares): $3 million from $4.2 million.
Facebook faces 'unprecedented' competition
During Wednesday's earnings report, Meta reported that Facebook's daily active users had fallen for the first time: 1.929 billion daily active users compared to 1.93 billion in the previous quarter.
Zuckerberg said competition from other social media platforms including viral video-sharing app Tiktok is "having an impact on our business."
Zuckerberg echoed that sentiment during an all-hands virtual meeting, saying the company faced an “unprecedented level of competition," Bloomberg reported, citing a person who attended but was not authorized to speak publicly about it,
He also said the company's weak revenue forecast for the current quarter triggered the historic stock decline, Bloomberg reported.
That forecast of slowed revenue growth "was a headline grabber and not in a good way," wrote Michael Nathanson of investment research firm MoffettNathanson in a note to investors Thursday.