For policymakers and investors for policymakers and investors, bad news could be positive when it comes to the latest information about the health of the employment market.

Stocks rose on Friday following fresh data showing that the quantity of jobs created to the economy was slightly higher than anticipated, which kept the unemployment rate low, however wages did not grow at the rate economists anticipated.

The good news for the market follows a slow beginning to 2023. the S&P 500 increasing by 1.8 percent during trading at midday on Friday, and set to close the first session of 2019 with slight rise.

Investors have been watching the labor market for indications of the course for interest rates through 2023. In the past the Federal Reserve sought to slow the pace of economic growth by increasing interest rates swiftly in a bid to bring down inflation that was soaring.

At the end in the calendar year the data suggested that inflation could have begun to ease. But the labor market is vital to the equation, and there is fierce competition for workers, pushing wages up and fueling inflation. Also, an overly competitive labor market is bad for the Fed's goal to reduce the rate of inflation.

"Recent inflation readings have lifted investors' spirits, but ongoing labor market tightness suggests that interest rates might have to go higher for longer than markets currently imply," said Ronald Temple, the chief market strategist at Lazard before the figures were announced.

This is the reason why easing wage increases was greeted on Friday by stock market investors who were eager to see the end of rate hikes by the Federal Reserve that have increased the cost of business and reduce stock prices.

Mr. Temple's comments indicate a shift in expectations regarding interest rates, with a lot of investors reassessing their expectations of the rate at which Fed officials will hike rates and for how they'll continue to keep borrowing costs high.

Two-year Treasury yield that is susceptible to shifts in Fed policy, plummeted to just below 4.3 percent. Investors are betting on an increase of quarter-points at the next Fed meeting in February. This is a change from the half-point increase in December that was already lower than the massive three-quarter-point hikes which occurred at the last four sessions. The Fed's rates are currently set at an area that ranges from 4.25 and 4.5 percent.

The Fed has warned investors against not overestimating themselves and making predictions about the conclusion of the Fed's war against inflation, before it's ended. Stock prices that rise due to signs of declining inflation benefit investors, resulting in a rise in the demand for stocks, and ultimately increasing inflation.

"An unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee's reaction function, would complicate the committee's effort to restore price stability," recorded the in the minutes from the meeting of December published this week..

For certain investors, this increases the risk of an even more severe economic recession as the Fed's desire to tackle inflation could tip an economy in recession.

"With the record-low unemployment rate indicating that there is still so much work ahead of them, Fed policy rates are set to rise above 5 percent within just a few months, and a hard landing looks to be the most likely outcome this year," said Seema Shah, principal strategist for Principal Asset Management. "The recession clock is ticking."
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