Economic Data Report
Strong jobs report could keep Fed on hold
- 272,000 jobs added in May
- Prior months revised down by 15,000 jobs
- Unemployment back up to 4.0%
- Strong employment may delay Fed rate cuts
Employment – May Payrolls Up, Unemployment Too
The May employment report came in stronger than expected with 272,000 jobs added. Most analysts had expected a much lower number. Unemployment also increased to 4.0%, its highest rate since January 2022. Lower labor force participation explains the divergence between strong payrolls and higher unemployment. Hourly earnings were up 4.1% over last year, so wage inflation continues to be a concern. We continue to believe that the Fed’s next move will be a cut, but markets initially interpreted this report to indicate rates will remain higher for longer. It should be noted that this report is at odds with other recent reports that indicate that the US economy is slowing down. In fact, the employment report itself contained details indicating that hiring may not be quite as strong as the headline number suggests. The updated Consumer Price Index (CPI) will be released on June 12, 2024, and that will give us a more direct measure of progress in the fight against inflation.
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This information is for informational purposes only and does not constitute investment advice.
Sources:
GDP – Bureau of Economic Analysis
Employment & Inflation – Bureau of Labor Statistics
Interest Rates – Federal Reserve
P/E S&P 500 – multpl.com
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