It’s the first Friday of the month, which means the Bureau of Labor Statistics will release the final jobs report of 2018 at 8:30 a.m. ET. The December data will be a crucial indicator of the health of the U.S. labor market and will offer a bit of insight into the unemployment rate, job additions, labor participation rate and wage growth.
The U.S. is expected to have added 184,000 in December, up from the 155,000 jobs added in November, according to economists polled by Bloomberg. Additionally, the unemployment rate is expected to have remained unchanged from 3.7% – the lowest rate in nearly 50 years, and average hourly earnings are anticipated to have grown at a 0.3% rate.
While November’s jobs report was weaker than expected, 2018 was a strong year for the labor market overall. Consensus remains that the December jobs report will show that the U.S. economy is still strong despite the recent bout of market volatility.
“While there’s been a tremendous amount of volatility in financial markets as well as in the political realm, it appears the U.S. economy is continuing to perform reasonably well,” Mark Hamrick, Bankrate.com’s senior economic analyst, said. “So, for the December employment report we’re expecting to see a rebound in job creation.”
Furthermore, Nomura outlined in a note to clients, “We expect the December employment report to remind markets that the U.S. growth outlook remains stable despite financial market volatility.”
The partial government shutdown that has temporarily laid off 380,000 federal employees will not affect December’s report. “Job growth is likely to have picked up in December. The recent government shutdown began after last month’s survey period so won’t impact December payrolls, although an extended shutdown would weigh heavily on January’s figures,” Capital Economics wrote in a note earlier this week.
Market commentary
Apple (AAPL) shook markets on Thursday after the company’s surprising cut to its outlook for the fourth quarter delivered late Wednesday.
Shares of the company fell as much as 9% after its revenue guidance for the holiday quarter was cut sharply to $84 billion from a previous range of $89-$93 billion.
Apple CEO Tim Cook drew a direct line from struggles in the Chinese economy and Trump’s trade war to struggles in its business, writing in a letter to shareholders that, “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China.”
And while Cook discussed challenges in China and the broader emerging market space at length, he also addressed a number of other struggles facing the company in the most recent quarter.
One of these stood out to us and others as particularly odd and particularly disappointing — battery replacements.
“While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance,” Cook wrote, adding, “including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.”
And it’s the last part of this sentence from Cook that should disappoint investors the most.
In 2018, Apple offered customers a new battery for a iPhones purchased in 2016 or earlier for just $29. The Washington Post advised readers to run, not walk, to get a new battery and extend the life of their current device. WaPo tech columnist Geoffrey Fowler said he had to join a “weeks-long waiting list” to get the battery on his iPhone replaced after the company slashed the price of this replacement battery by $50.
Demand for new iPhone batteries was clearly significant, and implies that demand for new iPhones was lukewarm. But the core bull thesis on Apple is not only a bet on increasing iPhone sales but also increasing stickiness with its services ecosystem. People replacing batteries to keep their iPhones working longer indicates a continued flow of dedicated Apple users that want to remain in the ecosystem.
A contented group of satisfied customers
Make no mistake — the biggest, most important, and undeniable piece of bad news from Apple is its view of the Chinese economy. Cook said that, “most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”
This is why shares of Apple’s Dow peers like Intel (INTC), Boeing (BA), and Caterpillar (CAT) were among the blue chip index’s biggest laggards alongside the iPhone maker on Thursday. Investors expressed concerns about China’s economic growth any way they could on Thursday.
But a limited-time promotion offering what amounts to an interim upgrade to an existing iPhone seems like a stretch to be listed as an excuse alongside a slowdown in the world’s second-largest economy. And what should disappoint investors most after Apple’s news is that the battery promotion seems to show a clear change in the behavior of consumers buying iPhones.
No longer are consumers excited about the latest iPhone design or getting the highest resolution screen or camera possible. Recent editions of iPhone are great devices, but no longer enough on their own to motivate consumers that are seeing sticker prices well north of $700 per phone as carrier subsidies have gone by the wayside.
Now, a new battery an extra year or two of perfectly functional performance from an existing iPhone is enough to keep Apple customers happy. And it’s a sign that Apple customers are decreasingly a group of ravenous loyalists who will spend anything and wait in any line to get the latest piece of spellbinding hardware, but a contented group of satisfied customers who would just like their current phone to work a little bit better for a little bit longer.
