Finance
The US added 818,000 fewer jobs this year than originally estimated
The labor market isn’t as strong as predicted, with 818,000 fewer jobs. (iStock )
The U.S. Bureau of Labor Statistics just reported that the U.S. added 818,000 fewer jobs over the last 12 months (through March) than they previously predicted. The -0.5% difference was reported in the preliminary estimate of the annual revision to the BLS employment series. Consumers won’t know the final numbers until February.
The largest discrepancy occurred in the professional and business services sector, with the revision showing 358,000 fewer jobs than originally reported. The retail industry had the second-largest revision at 129,000 fewer jobs. Manufacturing came in third with 115,000 fewer jobs.
The labor market isn’t in a dire place, but the unemployment rate still hovers near 4.3%, which is higher than the beginning of 2023, Jerome Powell, the Chair of the Federal Reserve, explained in recent comments.
The unemployment rate isn’t due to increased layoffs, but rather the large increase in the supply of workers. It’s also due to “slowdown from the previously frantic pace of hiring,” Powell said. Generally speaking, the job market is getting stronger.
“Overall, the economy continues to grow at a solid pace,” Powell explained. “But the inflation and labor market data show an evolving situation. The upside risks to inflation have diminished. And the downside risks to employment have increased.”
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The Fed is still poised to cut rates in September
Consumers have been waiting for the Federal Reserve to cut rates since the possibility of multiple rate cuts was announced at the beginning of the year. September finally appears to be the meeting where rates will be cut.
The Fed has held off cutting rates due to consistently high inflation. When inflation drops closer to 2%, the Fed is more likely to slash rates. A large majority of Federal Reserve officials claimed the central bank is likely to cut interest rates slightly in September, according to minutes from the policy meeting in July.
“Our restrictive monetary policy helped restore balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remained well anchored,” Powell said.
With inflation on the right trajectory, after a dip in progress earlier in the year, Americans can expect rate cuts soon. These cuts affect borrowing costs for mortgages, vehicles and student loans, among other lending options.
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Consumer sentiment stabilizes
Consumer sentiment regarding the economy has stabilized over the last month, signaling that Americans are slightly more positive about where the economy is at than they were a few years ago. In August, sentiment inched up by 2.1%, marking the fourth consecutive month sentiment remained about the same, PYMNTS reported.
The future economic outlook hasn’t remained as steady, instead shooting up to its highest level in five months, largely due to the election season. Election years don’t tend to alter the current economic sentiment but can impact American’s future thoughts on where the economy is going.
“Survey responses generally incorporate who, at the moment, consumers expect the next president will be,” explained Joanne Hsu, director of the University of Michigan Surveys of Consumers. “Some consumers note that if their election expectations do not come to pass, their expected trajectory of the economy would be entirely different.”
The rise in consumer sentiment for the future is thanks, in part, to Democrats feeling more confident in the new Democratic presidential nominee, Vice President Kamala Harris. Lowering inflation has also contributed to a brighter outlook, PYMNTS reported.
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Hiroki Takeuchi, co-founder and CEO of GoCardless.
Zed Jameson | Bloomberg | Getty Images
LISBON, Portugal — Financial technology unicorns aren’t in a rush to go public after buy now, pay later firm Klarna filed for a U.S. IPO — but they’re keeping a watchful eye on it for signs of when the market will open up again.
Last week, Klarna made a confidential filing to go public in the U.S., ending months of speculation over where the Swedish digital payments firm would list. Timing of the IPO is still unclear, and Klarna has yet to decide on pricing or the number of shares it’ll issue to the public.
Still, the development drew buzz from fintech circles with market watchers asking if the move marks the start of a resurgence in big fintech IPOs. For now, that doesn’t appear to be the case — however, founders say they’ll be watching the IPO market, eyeing pricing and eventually stock performance closely.
Hiroki Takeuchi, CEO of online payments startup GoCardless, said last week that it’s not yet time for his company to fire the starting gun on an IPO. He views listing as more of a milestone on a journey than an end goal.
“The markets have been challenging over the last few years,” Takeuchi, whose business GoCardless was last valued at over $2 billion, said in a CNBC-moderated panel at the Web Summit tech conference in Lisbon, Portugal.
“We need to be focused on building a better business,” Takeuchi added, noting that “the rest will follow” if the startup gets that right. GoCardless specializes in recurring payments, transactions that come out of a consumer’s bank account in a routine fashion — such as a monthly donation to charity.
Lucy Liu, co-founder of cross-border payments firm Airwallex, agreed with Takeuchi and said it’s also not the right time for Airwallex to go public. In a separate interview, Liu directed CNBC to what her fellow Airwallex co-founder and CEO Jack Zhang has said previously — that the firm expects to be “IPO-ready” by 2026.
“Every company is different,” Liu said onstage, sat alongside Takeuchi on the same panel. Airwallex is more focused on becoming the best it can be at solving friction in global cross-border payments, she said.
An IPO is a goal in the company’s trajectory — but it’s not the final milestone, according to Liu. “We’re constantly in conversations with our investors shareholders,” she said, adding that will change “when the time is right.”
‘Stars aligning’ for fintech IPOs
One thing’s for sure, though — analysts are much more optimistic about the outlook for fintech IPOs now than they were before.
“We outlined five handles to open the [IPO] window, and I think those stars are aligning in terms of the macro, interest rates, politics, the elections are out the way, volatility,” Navina Rajan, senior research analyst at private market data firm PitchBook, told CNBC.
“It’s definitely in a better place, but at the end of the day, we don’t know what’s going to happen, there’s a new president in the U.S.,” Rajan continued. “It will be interesting to see the timing of the IPO and also the valuation.”
Fintech companies have raised around 6.2 billion euros ($6.6 billion) in venture capital from the beginning of the year through Oct. 30, according to PitchBook data.
Jaidev Janardana, CEO and co-founder of British digital bank Zopa, told CNBC that an IPO is not an immediate priority for his firm.
“To be honest, it’s not the top of mind for me,” Janardana told CNBC. “I think we continue to be lucky to have supportive and long-term shareholders who support future growth as well.”
He implied private markets are currently still the most accommodative place to be able to build a technology business that’s focused on investing in growth.
However, Zopa’s CEO added that he’s seeing signs pointing toward a more favorable IPO market in the next couple of years, with the U.S. likely opening up in 2025.
That should mean that Europe becomes more open to IPOs happening the following year, according to Janardana. He didn’t disclose where Zopa is looking to go public.
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