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Today in the Market (6/3/2022)

Good Evening. Investors examined May jobs data, which likely sent Fed officials a signal that labor market conditions can withstand a more aggressive rate hike cycle, as stocks fell on Friday to end the week lower.

Tech companies led the sell-off on Friday, with the Nasdaq Composite plunging 2.47%. The S&P 500 index was down 1.63%, while the Dow Jones was down  1.05%.

BUSINESS

Elon Musk, the CEO of Tesla (TSLA), has a “very awful feeling” about the economy and needs to lay off approximately 10% of the company’s salaried employees, according to emails seen by Reuters.

On Thursday, he issued a note to executives outlining his worries and instructing them to “pause all hiring worldwide.” The bleak forecast comes two days after the billionaire warned employees to return to work or leave, and it adds to a rising chorus of warnings from corporate executives about the recession’s dangers.

Musk wrote in another email to employees on Friday that Tesla will reduce salaried personnel by 10%, as it has become “overstaffed in many areas.”However, “hourly headcount will increase, “he stated.

In an email seen by Reuters, Musk said, “Note, this does not apply to anyone actually building cars, battery packs or installing solar.”

Tesla and its subsidiaries employ about 100,000 employees at the end of 2021, according to the company’s annual SEC report. It did not differentiate between salaried and hourly workers.

Following the Reuters article, Tesla shares plunged 9.22% to $703.55 per share.

JOB REPORT

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In the United States, job growth was greater than projected last month. But beyond the surface, there are a few clues as to which way the wind is blowing in a tumultuous labor market.

The following are the most recent figures from the BLS’ May jobs report:

  • Non-farm payrolls: +390,000 vs. +318,000 expected

  • Unemployment rate: 3.6% vs. 3.5% expected

  • Average hourly earnings, month-over-month: +0.3% vs. +0.4% expected

  • Average hourly earnings, year-over-year: +5.2% vs. +5.2% expected

Last month, the number of retail workers fell by 60,700, a statistic that many may take as indicating a weaker consumer environment. However, the 47,000-job growth in transportation and warehousing implies that the Amazon side of the retail industry is still intact for the time being.

Leisure and hospitality also saw the highest gains last month, which isn’t surprising given the signs we’ve seen from travel-related plays about their demand backdrop moving into the summer months.

In terms of labor market composition, the loss of 211,000 workers is noteworthy, as retirements were considered as a hindrance last year in the labor market’s full and timely recovery from the pandemic-induced shock.

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