Macro-Economy vs Crypto
w/ EconomicNinja
A slowdown in job growth is typically considered bad news because it can signal that the economy is cooling and that there may be a recession on the horizon. However, in recent months, investors have cheered news of a slowdown in job growth. This is because it suggests that the Federal Reserve is making progress in its fight against inflation.
The Fed has been raising interest rates in an effort to slow the economy and bring inflation down to its target level of 2%. Higher interest rates make it more expensive for businesses to borrow money and invest, and they also make it more expensive for consumers to borrow money and spend money. This can lead to slower economic growth and lower inflation.
Investors are cheering news of a slowdown in job growth because they believe that it is a sign that the Fed's rate hikes are working. They are also hopeful that a slowdown in job growth will lead to a soft landing for the economy, meaning that the Fed will be able to bring inflation down without causing a recession.
Here are some specific reasons why investors rejoiced when the US government reported that job growth slowed in October:
It suggests that the Fed is making progress in its fight against inflation. As mentioned above, investors are hopeful that a slowdown in job growth will lead to a soft landing for the economy, meaning that the Fed will be able to bring inflation down without causing a recession.
It reduces the risk of a recession. A sharp slowdown in job growth could lead to a recession, but a more gradual slowdown is less likely to do so.
It could lead to lower interest rates in the future. If the Fed is able to bring inflation down without causing a recession, it may be able to start lowering interest rates again in the future. This would be good for both businesses and consumers.
Of course, there is always the risk that a slowdown in job growth could turn into a recession. However, investors are willing to take that risk in the hope that a soft landing is possible.
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