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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Joe Biden declares America’s economy ‘is the strongest in the world’ after jobs report smashes forecasts – as it happened

United States Andrew Bailey United Kingdom Bank of England Microsoft Artificial Intelligence US Federal Reserve
The White House in Washington, U.S.
The White House in Washington, U.S. Photograph: Julia Nikhinson/Reuters

Closing post

Time to recap.

The US added 353,000 jobs in January, almost twice as many than forecast, in a sign that the economy is stronger than thought – and that interest rates may remain higher for longer.

The latest non-farm payroll report blew expectation away – economists had expected around 180,000 new jobs to be created last month. November and December’s data was revised higher too.

Wage growth was also pacier, increasing by 4.5% per year or by 0.6% in January alone.

President Biden welcomed the report, saying:

America’s economy is the strongest in the world. Today, we saw more proof, with another month of strong wage gains and employment gains of over 350,000 in January, continuing the strong growth from last year.

News of the strong jobs market could help Biden in this year’s presidential race, which we are covering here:

Economists said the strong jobs report made it very hard to see the US Federal Reserve starting to cut interest rates at its next meeting in March, while a May rate cut was also seen as less likely.

Daniele Antonucci, chief investment officer at Quintet Private Bank, explains:

The strength of the US labour market continues to undermine the market’s view that interest rates will be cut soon and sharply. Job and wage growth, once again, were both stronger than expected, and the unemployment rate was lower.

This looks like a genuine surprise relative to the consensus, with employment figures almost double economists’ forecasts, far outstripping the highest projections across the main analyst polls.

Even though we think the Fed is likely to start lowering its policy rate at some point this year, we believe that job creation in the US is currently too strong to expect that to happen in the near term.

Here’s the full story:

Here’s the rest of today’s business news:

Traders have scaled back their bets on a US interest rate cut in May, putting the odds at around 88%, the Financial Times points out.

Before the report, a cut in May had been fully priced in.

Newsflash: Back in the UK, Tata Steel has announced the start of a 45-day formal consultation on restructuring its business.

This restructuring is set to lead to up to 2,800 job losses in total. Tata is shutting two blast furnaces,replacing them with an electric arc furnace that will produce steel by melting recycled steel scrap.

It’s understood that 2,500 jobs are being lost between April 2024 and September 2025, including almost 2,000 redundancies at Port Talbot.

Earlier this week TV Narendran, Tata Steel’s global chief executive, defended his decision to make thousands of workers redundant at Port Talbot, saying the steelworks had lost £160m in the last quarter.

Economist Elise Gould has written a neat thread, pulling together the key points in today’s US jobs report:

US payrolls have started the new year with “a bang”, says David Page, head of macro research at AXA Investment Managers.

Page adds:

  • Payroll gains surprised to the upside, rising by 353,000 in January, with December revised up 117,000 and broader revision to last year up 359,000.

  • Gains were well spread over sectors, more broadly than just government and healthcare sectors of recent months.

  • The household measure of employment was weaker and showed marked divergence from the establishment survey.

  • Yet declines in labour supply meant unemployment remained low at 3.7%

  • Average earnings provided a further surprise, rising by 0.6% m/m, up 5.4% (3m annualised).

  • Despite focus on good inflation progress to date, the Fed cannot afford to ignore this robust performance.

  • This adds to our view that the Fed will not ease policy until June this year, and will cut four times, rather than the five still priced by markets across the course of this year.

January’s jobs report shows the highest number of new jobs in a year, as Larry Adam, chief investment officer at Raymond James, shows here:

The US dollar is continuing to rally; it just hit its highest level against a basket of currencies since mid-December.

A March cut in US interest rates now looks extremely unlikely, says Michael Hewson chief market analyst at CMC Markets UK.

If March wasn’t off the table as far as rate cuts were concerned before today’s payroll numbers, it’s not even in the same room now.

That said this wasn’t bad news for US markets given that the prospect of a recession looks even further away than ever, but also means that on an economic basis a resilient US economy should mean company earnings hold up.

It also helps to explain why even though the S&P500 gave up most of its premarket gains, it still managed to open higher, along with the Nasdaq 100.

In another boost, US consumer sentiment soared in January to its highest level in two and a half years.

The University of Michigan Consumer Sentiment Index has risen by 9.3 points in January to 79.0, the highest since July 2021.

The increase reflects “improvements in the outlook for both inflation and personal incomes”.

Biden: America’s economy is the strongest in the world.

President Joe Biden has welcomed another month of strong job creation, pointing out that the US has added almost 15 million jobs since he was sworn in.

Responding to today’s strong non-farm payroll report, showing 353,000 new jobs were created in January, he says:

America’s economy is the strongest in the world.

Today, we saw more proof, with another month of strong wage gains and employment gains of over 350,000 in January, continuing the strong growth from last year. Our economy has created 14.8 million jobs since I took office, unemployment has been under 4% for two full years now, and inflation has been at the pre-pandemic level of 2% over the last half year. It’s great news for working families that wages, wealth, and jobs are higher now than before the pandemic, and I won’t stop fighting to lower costs and build an economy from the middle out and bottom up. I’ll continue to stand in the way of efforts by Congressional Republicans to enact massive tax giveaways for the wealthy and big corporations; cut Medicare, Medicaid, and Social Security; and raise costs for American families.

Here’s US secretary of commerce Gina Raimondo:

Updated

The recovery continues…

One interesting wrinkle in the otherwise strong jobs report is that the average working week fell in January.

The average number of hours worked fell by 0.2 to 34.1, its lowest since March 2020. This may be because many of the jobs created were part time positions, or by because demand for labour weakened…

Wall Street is taking the US jobs report pretty calmly.

The S&P 500 index has gained 10 points, or 0.2%, in early trading to 4,916 points, even though US interest rates may remain higher for longer.

Facebook owner Meta is surging, up 19%, after its strong financial results last night.

The tech-focused Nasdaq Composite has gained 0.67%. However, the Dow Jones Industrial Average has dipped by 0.3%

The job market is kicking off 2024 with a bang, says Glassdoor’s lead economist Daniel Zhao, adding:

The January jobs report reaffirms that the job market situation in 2023 was resilient and sets the stage for a strong start in 2024. Unexpectedly, benchmark revisions show the job gains were more impressive than they seemed at the time. Hotter than expected payroll and wage growth will likely encourage the Fed to hold pat as they feel little pressure to begin cutting rates.”

The January jobs report for 2024 shows stronger-than-expected payroll growth, signaling a promising start for employees and employers . While unemployment remains steady and jobs gain keep rising, a soft landing is still on the horizon this year.

This is a good example of how surprisingly strong January’s jobs report is:

US bond prices are weakening, as traders slash their forecasts for early cuts to US interest rates.

This has pushed up the yield, or interest rate, on two-year Treasury bills by 19 basis points to almost 4.39%, up from 4.19%.

Benchmark 10-year Treasuries are also selling off, pushing up their yield by 14 basis points to 4% from 3.86%.

(yields rise when bond prices fall)

US job creation was fairly well spread in January, although employment in the mining, quarrying, and oil and gas extraction industry declined a litle.

Here’s the details:

  • Professional and business services added 74,000 jobs in January, including 42,000 in professional, scientific, and technical services. Employment in temporary help services rose by 4,000

  • Employment in health care rose by 70,000, with gains in ambulatory health care services (+33,000), hospitals (+20,000), and nursing and residential care facilities (+17,000).

  • Retail trade employment increased by 45,000, including 24,000 jobs at general merchandise retailers

  • Employment in social assistance rose by 30,000 in January, reflecting continued growth in individual and family services (+22,000).

  • Manufacturing employment rose by 23,000, including job gains in chemical manufacturing (+7,000) and printing and related support activities (+5,000).

  • Government employment continued to trend up in January (+36,000), below the average monthly gain of 57,000 in 2023.

  • In January, employment in information continued its upward trend (+15,000). Employment in motion picture and sound recording industries increased by 12,000, while employment in telecommunications decreased by 3,000.

Full story: US hiring stronger than expected as economy adds 353,000 monthly jobs

The US jobs market defied fears of a downturn again in January with employers adding 353,000 new jobs over the month, the labor department announced on Friday.

The US jobs market has remained strong despite an aggressive series of interest rate rises by the Federal Reserve, aimed at cooling the economy and bringing down the rate of inflation. In January the unemployment rate was 3.7%, close to a 50-year low.

More here.

A March cut to US interest rates must be off the table following January’s stronger-than-expected jobs report, says Seema Shah, chief global strategist at Principal Asset Management.

Shah explains:

“On the basis of today’s jobs report, there is absolutely no sign of a softening labour market or weakening wage pressures. It wasn’t just a strong January, it turns out that previous months were stronger than initially believed.

Throw in the sharp move higher in average hourly earnings and Fed officials must be wondering if their rate hikes have had any impact on the economy. The dramatic upside surprise to both jobs and wage growth means that a March rate cut must be off the table now, and a May cut is also now potentially on ice. Certainly, with this kind of number, the 6 or 7 rate cuts that markets had been pricing in seems very offside.”

Booooooom indeed!

The dollar is rallying

The US dollar is strengthening on the back of the blowout US jobs report.

It’s up almost 0.5% against the pound today, pushing sterling down to $1.2690.

US jobs report: snap reaction

Today’s strong US jobs report indicates that demand in the labour market is higher than expected, says Richard Flynn, managing director at Charles Schwab UK, adding:

Up until recently, this may have set alarm bells ringing in the market. Cooler employment figures would imply lower inflationary pressures, potentially paving the way for rate cuts. And while lower interest rates would surely be welcomed, it is becoming increasingly clear that markets and the economy are coping well with the high rate environment, so investors are perhaps feeling that the need for monetary policy to ease is less urgent.

Today’s figures may be another factor delaying the Fed’s first rate cut closer to summer, but if the economy maintains its comfortable trajectory, that might not be a bad thing. What’s the hurry?”

Neal Keane, head of global sales trading at ADSS, says investors continue to be caught off guard as data continues to surprise to the upside, making the case for rate cuts less obvious.

Fed Chair Powell walked back market expectations for a March rate cut during Wednesday’s press conference – and while markets now expect the Fed to cut in May, this is dependent on deteriorating economic data with inflation continuing to trend lower.”

Any thoughts of recession are off the mark, reckons Neil Birrell, chief investment officer at Premier Miton Investors:

The US employment data provided a shock, beating expectations by miles, with earnings much higher than expected as well. These numbers show the US economy to be strong and will sway anyone thinking a March rate cut was on the way to look further out.

Any thoughts of recession are off the mark as well for now, and markets will have to adjust towards the Fed’s view of when policy will change.”

US wage growth beats forecasts too

US wage growth was also stronger than expected in January

Over the past 12 months, average hourly earnings have increased by 4.5%, today’s jobs report shows.

That’s ahead of forecasts of 4.1% growth.

In January, average hourly earnings for all employees on private nonfarm payrolls rose by 19 cents, or 0.6%, to $34.55.

US jobs report smashes forecasts

Newsflash: The US economy added twice as many jobs as expected in January, as America’s labor market remained stronger than expected.

Total nonfarm payroll employment rose by 353,000 in January, new data from the U.S. Bureau of Labor Statistics shows, beating forecasts of an increase of 180,000 jobs.

The unemployment rate remained at 3.7 percent.

The BLS says:

Job gains occurred in professional and business services, health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.

December’s jobs growth has been revised up too, to 333.000, from the first estimate of 216,000.

This jobs growth should cool concerns that the US economy was faltering, but also suggests it will take longer for the US Federal Reserve to start cutting interest rates.

BoE's Pill: right time for a rate cut is 'still some way off'

The Bank of England’s chief economist has predicted that the first cut in interest rates is probably still some time away.

Speaking at an online briefing to the Bank’s regional agents today, Huw Pill said the central bank should focus on keeping policy tight enough to squeeze out domestic inflationary pressures, adding:

“Crucially, for me at least, we don’t have sufficient evidence yet. So that moment at which Bank Rate cuts might be possible is still some way off.”

Yesterday’s Bank forecasts showed inflation could drop to its 2% target this spring, before rising back to 2.75% by the end of this year.

Updated

In other energy news, US oil giants ExxonMobil and Chevron have posted their second-biggest annual profits in a decade.

Both supermajors boosted their output in 2023, making up for a drop in prices, helping Exxon to record full-year net income of $36bn, while Chevron made $21.4bn.

Energy giant BP has continued to reshuffle its leadership team following the shock departure of CEO Bernard Looney last September.

BP has today named Kate Thomson as its permanent chief financial officer, on an annual salary of £800,000.

She will succeed Murray Auchincloss, who was appointed as CEO last month to replace Looney who departed after failing to fully disclose a series of personal relationships with his colleagues to the board.

Thomson, who has been interim chief financial officer since Looney’s exit rocked BP, will also join the company’s board.

She says:

“We’ve made great progress through the past few years in strengthening bp, and I have no doubt this will continue. I’m excited about how we can continue to drive bp’s focus on delivery and growing value as we work towards hitting our targets for 2025.”

Trump says he would not reappoint Powell as Fed Chair if elected

Newsflash: Donald Trump has declared that he would not reappoint Jerome Powell to head the Federal Reserve if he is reelected in November.

Speaking to Fox Business, Trump claimed that Powell was looking to lower interest rates to help President Joe Biden in the election race.

When asked about keeping Powell, Trump replied:

“No, I wouldn’t.

“I think he’s going to do something to help the Democrats, if he lowers interest rates”

The financial markets have been anticipating a flurry of Fed rate cuts this year for some time. But on Wednesday, Powell actually tried to dampen speculation that monetary policy could be eased as soon as March.

Hope of rate cuts has pushed up the financial markets since last autumn.

Trump, though, was keen to take the credit

Bloomberg explains:

Asked why the stock market was doing so well if the economy is in bad shape under Biden, Trump said traders were optimistic he would return to the White House.

“Because they think I’m going to be elected,” he said.

During Trump’s first time, he declined to reappoint Janet Yellen as Fed chair – choosing Jerome Powell as her successor.

Superdry reveals CEO Dunkerton is exploring possible takeover

Newsflash: Superdry has told the City that its chief executive, Julian Dunkerton, is working on a bid to take the company private!

In a statement, Superdry says it “notes the movement in its share price” (doubling this morning).

And it reveals it has accepted a request from Dunkerton, co-founder of the company, to explore the possibility of making an offer for the Company and to start talks with potential sources of finance.

Dunkerton now has until 5pm on 1 March to make a bid, or walk away, under the City’s takeover rules.

Superdry says it created an independent committee to consider Dunkerton’s request, adding:

Julian Dunkerton has since confirmed to the Transaction Committee that he is engaged in discussions with potential financing partners (“Potential Sponsors”) for the purposes of considering options in respect of the Company, which may include a possible cash offer for the entire issued and to be issued share capital of the Company, not already owned by him. These discussions are at a preliminary stage and no decisions have been made.

The Transaction Committee has provided limited additional information to Julian Dunkerton and the Potential Sponsors to facilitate further exploration of a possible offer for the Company. There can be no certainty that an offer will be made, nor as to the terms on which any such offer might be made.

Dunkerton is Superdry’s largest shareholder, with 26% of the company.

Back in 2019, Dunkerton won a battle to rejoin Superdry’s board, after a failed revamp by its management resulted in a collapse in sales and profits

And still they climb… Superdry are now up 112% this morning at 45p, as speculation about possible takeover interest bubbles away.

That’s the highest since last October, and means its market capitalisation has more than doubled from £21m to over £44m.

The company floated in London in 2010 at 500p, in a heavily oversubscribed offer for the then fast-growing firm.

At their alltime peak, in early 2018, Superdry traded over £20 per share.

Superdry’s share price

But has struggled since, as its losses built and it struggled to compete amid the pandemic, then the cost of living crisis and then a long financing struggle.

Updated

Intriguingly, sources told The Times that the value of Superdry owned by a brand management company would be about £400m to £600m.

That’s rather more than its market capitalisation last night of around £21m….

Superdry shares surge amid takeover talk

Shares in the fashion retailer Superdry have surged by almost 80% this morning amid takeover speculation after a new investor began building a stake in the company.

Superdry shares have hit their highest level since 18 December last year, at 38.7p.

The rally comes after First Seagull, the Norwegian-based alternative investment fund, bought a 5.3% stake in Superdry, a regulatory filing this week showed.

The Times reports that takeover talk surrounding Superdry is growing even louder, saying:

It is understood that First Seagull considers Superdry to be ripe for a bid after a series of profit warnings over the past year drove down its share price. Sycamore Partners, an American private equity company, and Authentic Brands Group, which owns Ted Baker and Forever 21, are said to have Superdry on their radars.

One source told the Times:

It’s just a matter of time before there’s an offer.

Last month, Superdry lost its fourth finance boss in five years after its losses widened.

In mid-December, it issued a profits warning, blaming “abnormally mild” weather for a drop in sales.

Updated

IMF sees China's growth slowing

The International Monetary Fund has issued a warning that China’s economic slowdown is likely to persist in the coming years.

The IMF predicts that China’s growth will slow, as it tries to tackle sagging productivity and a rapidly aging population.

Growth this year is expected to slow to 4.6%, from 5.2% in 2023 – by 2028, it is seen weakening to just 3.5% “amid headwinds from weak productivity and population aging”

Uncertainty surrounding the outlook is high, the IMF adds.

Last night, Apple reported a drop in sales in China, its third-largest market, from $23.9bn to $20.8bn.

In a new blogpost, the IMF also highlights that Beijing must managing the medium-term slowdown in its real estate sector, adding;

Accelerated cleanup of distressed developers and other policies will help smooth the path to a smaller, more sustainable role in the economy.

Earlier this week a Hong Kong court ordered the liquidation of the indebted Chinese development company Evergrande after it failed to agree a restructuring plan with creditors.

Updated

World food price index near three-year low

World food commodity prices have dropped to their lowest level in almost three years, led by lower wheat and maize prices, data from the United Nations shows.

The UN’s food price index, which tracks the most globally traded food commodities, dipped to 118.0 points in January, down from 119.1 in December.

That’s over 10% lower than a year ago, and well below the record high in early 2022 after the Ukraine war drove up wheat prices.

The UN food price index

The FAO cereal price index fell by 2.2% in January, driven by “strong competition among exporters and the arrival of recently harvested supplies in the southern hemisphere countries”.

Meat prices fell by 1.4%, the seventh monthly drop in a row, helped by “abundant supplies” of poultry, bovine and pig meats.

Vegetable oil prices rose by 0.1%, but were still 12.8% lower than a year earlier.

The easing of global food prices has not yet really reached consumers, with UK food inflation running at 6.1% in January, according to the British Retail Consortium.

Updated

There’s encouraging economic news from France this morning, where industrial production expanded in December for the second consecutive month.

French factory output jumped by a better-than-expected 1.1% in the final month of 2023, faster than expected.

ING’s Charlotte de Montpellier believes “‘the worst appears to be over for the sector,” meaning it should recover in 2024.

Statistics body INSEE flags, though, that an “unusually high share” of the end-of-year school vacations took place in January, rather than being concentrated mainly in December as usual. So that may have kept industrial workers busy in December.

Updated

The Swedish appliances maker Electrolux has said consumer morale remains weak after it posted a quartery loss this morning.

Electrolux’s fourth-quarter loss had widened to around 3.2bn Swedish crowns, up from 2.0bn crowns a year ago.

It expects demand for core appliances in 2024 to be relatively neutral for all regions compared to 2023, as consumers continue to cut back or delay spending.

CEO Jonas Samuelsson said:

Looking into the beginning of 2024, weak consumer sentiment is anticipated to continue with consumers shifting to lower price points and postponing purchases in discretionary categories.

Updated

UK public inflation expectations rise in January

The British public’s expectations for inflation have increased, as they fret that disruption to shipping through the Red Sea will push up costs.

A survey published by Citi/YouGov this morning found that public expectations for inflation for the 12 months ahead rose to 3.9% in January from 3.5%, reversing December’s drop.

Many shipping firms are now avoiding the Suez canal, which is leading to longer shipping times and pushing up transportation costs.

A survey yesterday showed that UK manufacturers’ costs are rising… just as Adidas, Europe’s largest sportswear manufacturer Adidas, said shipping disruptions would affect its profit margins.

It’s tempting to speculate whether artificial intelligence could do a better job of setting interest rates than the Bank of England.

Yesterday, the BoE’s policymakers were split three ways on monetary policy, with two voting to raise interest rates, one pushing for a cut, and the other six deciding rates should remain at 5.25%.

The Bank appears to be inching towards a rate cut fairly soon; it wants more evidence that inflation will fall back to its 2% and then stay there.

The City money markets predict the first rate cut will come by June, but that there’s a 10% possibility it might be as early as March.

So, I asked ChatGPT when the Bank might cut rates – and it provided some situations under which monetary policy could be eased:

  1. Economic Downturn: If there is a significant economic downturn or recession, the Bank of England may lower interest rates to stimulate borrowing, spending, and investment. Lower interest rates can encourage consumers and businesses to borrow and spend, thereby boosting economic activity.

  2. Inflation Below Target: If inflation is consistently below the target set by the central bank, it may choose to cut interest rates to encourage spending and investment, which can help push inflation towards the target.

  3. Global Economic Uncertainty: External factors, such as global economic uncertainty or financial market turbulence, can also influence the Bank of England’s decisions. Cutting interest rates in such situations can be a preemptive measure to support the economy and financial stability.

  4. Exchange Rate Considerations: The central bank may also consider the impact of interest rate changes on the exchange rate. Lower interest rates may lead to a depreciation of the currency, which can benefit exports and contribute to economic growth.

  5. Credit Conditions: If there are signs of tightening credit conditions that could restrict borrowing and investment, the central bank might lower interest rates to make borrowing more attractive and accessible.

  6. Unemployment Concerns: If there are concerns about rising unemployment, the central bank might use interest rate cuts to stimulate economic activity and job creation.

The UK government doesn’t accept the claim that it is “too focused on a narrow view of AI safety”, as the House of Lords Communications and Digital Committee warns.

Responding to their report, a spokesperson from the Department for Science, Innovation and Technology (DSIT), said:

We do not accept this – the UK is a clear leader in AI research and development, and as a Government we are already backing AI’s boundless potential to improve lives, pouring millions of pounds into rolling out solutions that will transform healthcare, education and business growth, including through our newly announced AI Opportunity Forum.

The future of AI is safe AI. It is only by addressing the risks of today and tomorrow that we can harness its incredible opportunities and attract even more of the jobs and investment that will come from this new wave of technology.

That’s why we have spent more than any other government on safety research through the AI Safety Institute and are promoting a pro-innovation approach to AI regulation.

Last November, Rishi Sunak organised the landmark AI Safety summit at Bletchley Park, where attendees signed a declaration that AI should be designed in a human-centric, trustworthy and responsible way.

Updated

Lords: UK must not miss out on 'AI goldrush'

Andrew Bailey’s comments on AI come as a House of Lords committee warns that the UK risks missing out on the “AI goldrush”, and urges the government to adopt a more positive vision.

The Lords Communications and Digital Committee says the UK’s approach to artificial intelligence has become too narrowly focused on AI safety and the threats the technology could pose, rather than its benefits.

In a major report on artificial intelligence and large language models (LLMs) – which power generative AI tools such as ChatGPT – the committee say the technology would produce era-defining changes comparable with the invention of the internet.

However, it warned that the UK needed to rebalance its approach to the subject to also consider the opportunities AI can offer, otherwise it will lose its international influence and become strategically dependent on overseas tech firms for a technology which is expected to play a key role in daily life in the years to come.

It said that some of the “apocalyptic” concerns around threats to human existence from AI were exaggerated, and should not distract policy makers from responding to more immediate issues.

Baroness Stowell of Beeston, Chairman of the House of Lords Communications and Digital Committee, said:

The rapid development of AI Large Language Models is likely to have a profound effect on society, comparable to the introduction of the internet. That makes it vital for the Government to get its approach right and not miss out on opportunities – particularly not if this is out of caution for far-off and improbable risks.

We need to address risks in order to be able to take advantage of the opportunities – but we need to be proportionate and practical. We must avoid the UK missing out on a potential AI goldrush.

Updated

Introduction: BoE governor says AI will not be mass destroyer of jobs

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

Artificial Intelligence (AI) technologies have “great potential” for the economy and will not be a “mass destroyer of jobs”, the governor of the Bank of England argues.

After leaving UK interest rates on hold at 5.25% yesterday, Andrew Bailey has said human workers will learn to work with new technologies.

Bailey told the BBC that history shows the benefits of new technology:

“I’m an economic historian, before I became a central banker. Economies adapt, jobs adapt, and we learn to work with it. And I think, you get a better result by people with machines than with machines on their own.

So I’m an optimist…”

Policymakers globally are grappling with the consequences of generative AI – for the jobs market, but also its potential to generate misinformation (not forgetting its habit of “hallucinating” and generating nonsense).

Last month, the International Monetary Fund warned that almost 40% of jobs around the world could be affected by the rise of AI, requiring safety nets to protect those who lose out.

The BoE itself is concerned that rapid developments in artificial intelligence and machine learning could pose risks to the UK’s financial stability; last December it launched a new review into their use across the City.

Many businesses have been flocking to implement AI tech such as chatbots, with nearly a third telling the BOE they have made significant AI investments in the past year.

This week’s flurry of financial results from tech giants has shown the impact.

Microsoft reported a 30% increase in revenues at its Azure plarform on Tuesday night, with artificial intelligence giving 6 percentage point boost.

Satya Nadella, chairman and chief executive officer of Microsoft, declared:

We’ve moved from talking about AI to applying AI at scale.”

But both Microsoft and Google warned that costs are rising as they race to develop cutting-edge AI products.

Also coming up today

The health of the US jobs market is also in focus today, as investors await the latest jobs report from the states.

Investors expect a small slowdown in job creation; January’s non-farm payroll is expected to show 180 new jobs were created, down from the 216,000 in December.

Average hourly earnings are seen rising 0.3% month-on-month (or 4.1% year-on-year).

A strong jobs report would ease concerns that the US economy is slowing, but could also sink hopes that US interest rates would be cut as soon as March.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explains:

A reasonably weak number should revive the Federal Reserve (Fed) doves, while a strong number should melt the March rate cut expectations.

The probability of a March hike fell to 35% after the Fed said [on Wednesday] that March was probably too early to cut rates – while this probability was around 80% at the start of the year. Everyone is focused on the May meeting now, with more than 90% probability priced in for the first Fed cut.

The agenda

  • 7.45am GMT: French industrial production report for December

  • 1.30pm GMT: US non-farm payroll jobs report

  • 3pm GMT: US factory orders data for December

  • 3pm GMT: University of Michigan’s US consumer sentiment report

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