A Juicy Jobs Report

If there’s been one economic data point that forecasters and the Federal Reserve have had a difficult time getting a handle on, it’s been the labor market. And that continued this week, with a slew of data beating Wall Street’s expectations. 😮

Nonfarm payrolls rose 339,000 in May, topping the 190,000 estimate by a wide margin. This marked the 29th straight month of positive job growth, bringing the number of jobs created in 2023 to nearly 1.6 million. It also aligned with the 12-month average, showing that the labor market remains strong despite the Fed’s efforts to cool it.

The labor force participation rate was unchanged. However, a 369,000 decline in self-employment pushed the unemployment rate to 3.7%. 🔺

A 0.3% MoM increase in average hourly earnings aligned with estimates. Meanwhile, the 4.3% YoY increase was 0.1% below expectations. Additionally, the average workweek fell by 0.1 hours to 34.3 hours.

April’s JOLTs report from earlier in the week indicated 1.8 job openings for every unemployed person. That increased from 1.7 in March, as job openings jumped to 10.1 million. And the initial and continuing jobless claims trends remain volatile and near historic lows.

Overall, this combination of data keeps the Federal Reserve in a difficult spot. It recently came out and signaled a likely pause at the June meeting. However, its assumption that inflation will continue to trend lower includes a weaker labor market and reduced consumer spending. ⏯️

So far, we’ve not seen that. At best, we’ve gotten mixed signals from companies this earnings season about their view of the consumer. Many are baffled at how well spending has held up in the face of many challenges. But baffling aside, that’s what is happening. 🤷

The news sent treasury yields higher and stocks soaring. But, despite higher yields putting pressure on multiples and economic growth prospects, the market remains optimistic that corporate earnings can hold up in the current environment. As a result, stocks are going up. 

The Federal Reserve’s next meeting is on June 13-14. Investors will be watching closely to see how the Fed interprets the current environment and adjusts its policy outlook. As of today, the bond market is pricing in a 70% chance of a June pause and a 30% chance for another 25 bp hike. And expectations for the first rate cut have been pushed out to January of 2024. 📆

Only time will tell who is right. But for now, optimism is reigning supreme. 🌞

More in   Economy

View All

Two Year Lows In Inflation

The highly-anticipated inflation data delivered another win for the bulls as it continued its downward progress. 🐂

May’s headline consumer price index (CPI) rose 0.1% MoM and 4% YoY, marking its smallest 12-month increase since March 2021. A 3.6% decline in energy prices helped offset gains elsewhere, with food prices also rising just 0.2%. ⛽

Read It

Stocks Fly Amid Low(er) CPI

Stocks and bonds rallied in tandem today as investors seemingly proclaimed victory over inflation. While the Fed and other global central banks are certainly still worried about inflation, stock market investors are looking past it. Let’s look at June’s numbers. 👇

The headline consumer price index (CPI) increased 0.2% MoM and 3% YoY, marking its slowest annual rate in over two years. That was lower than the 0.3% MoM and 3.1% YoY increase anticipated by analysts. When stripping out food and energy prices, core CPI jumped 0.2% MoM and 4.8% YoY vs. the 0.3% and 5.0% anticipated. That marked the lowest annual rate since October 2021. 🌡️

Read It

The Housing Market Horror Continues

We’ve written extensively about the U.S. housing market’s troubles over the last eighteen months. But we saw a visual created by Michael McDonough and shared by Cullen Roche that really highlights just how rough things have gotten for homebuyers. 😬

Below is a chart that looks to track an “average” home purchase over the last 20+ years. It calculates the monthly mortgage payment using median existing home prices, assuming a 20% down payment and average 30-year mortgage rates.

Read It

13,000 Auto Workers Strike

After failing to reach a deal with the “Big Three Automakers” before Thursday’s 11:59 p.m. deadline, the United Auto Workers (UAW) union officially launched its historic strike. Although there have been major strikes before, there has never been a strike against all three automakers at once.

Combined, the automakers have 150,000 UAW-represented employees across their operations. For now, though, the strike is beginning at just one factory from each automaker, accounting for roughly 13,000 workers. However, union leaders say they could gradually expand the strike to additional plants (or all of them) if their demands are unmet.

Read It