Hello. My name is Jack Manley and I'm a global market strategist at JP Morgan Asset Management. This is on the minds of investors, where today's subject is, is the labor market as strong as investors fear? Today's investing landscape is dominated by a sentiment that may seem odd at first glance. Namely, that good news is bad news.

More specifically, good news for the economy is bad news for the stock market. This is because any sign of a healthy economy suggests that the Fed has been ineffective at slowing things down, and as a result has more work to do. This work, of course, means rate hikes, which have battered stock and bond markets together this year at near unprecedented levels.

It is for this reason that the most recent employment report, while good news for workers, was taken so poorly by markets. The report was a surprise for a number of reasons. First, payroll gains were significantly above consensus expectations, signaling that labor demand remains strong. And second, monthly gains for wages were more than double consensus expectations, accelerating year over year gains to an impressive 5.1%.

Given the implications of these surprisingly strong readings, it would be wise for investors to pause and ask, is the labor market actually as strong as the stock and bond markets fear? The answer, for better or for worse, is more nuanced than what the headline figures say.

First, the upside surprise in payroll gains was matched by a modest downward revision to the previous two months. It was also the weakest reading in 2 and 1/2 years. Second, the strong establishment survey, which measures job gains from the perspective of employers, was balanced by a weak household survey, which measures gains from the perspective of individuals, where payrolls fell by 138,000, the series' second consecutive decline.

And finally, wage growth still lags behind inflation, meaning that workers are struggling to keep up with the upward pressure on prices. Moreover, the average workweek shrunk modestly, perhaps due to increased illness or bad weather, and this has historically coincided with a rise in earnings.

That said, the apparent strength of the US labor market should not be discounted entirely. Wages are still rising, and will likely continue to do so given structural labor supply shortages thanks to demographic shifts and the potential impact of long COVID. And labor demand remains high, as evidenced by the very high ratio of job openings to job seekers. It's currently sitting at 1.7 times.

Still, investors may take comfort that the labor market may not be as strong as some fear. In a world where good news and bad news and bad news good, this may suggest that the Fed is close to the end of its hiking cycle, and that now is a good time to be a long-term investor in both stocks and bonds.