Here’s What Wall Street Thinks About A Jobs Report So Good The New York Times ‘Ran Out Of Words To Describe It’

Well, we already know what President Dennison thinks about the May jobs report. In fact, we knew what he thought about the numbers before we even knew what the numbers were.

And because no one has ever accused Trump of being subtle, the fact that we knew what he thought about the numbers ahead of time means we also had a good idea what those numbers would look like, which in turn means he probably broke some kind of law with his morning tweet.

BREAKING: Insider trading now legal https://t.co/3BEmVRmD6C

— Thornton McEnery (@ThorntonMcEnery) June 1, 2018

But hey, leaking the most important economic data release on the calendar is nothing compared to obstruction of justice and high treason, so you know, what’s the big deal, right?

Ironically (and characteristically), Trump managed to do the exact opposite of what he meant to do. That is, instead of highlighting how good the economy is apparently doing, he’s made this all about him by turning an NFP print into a goddamn political sideshow.

Still, it’s incumbent on everyone to try and get past his maybe illegal tweeting and try to focus on what the report actually means and let me tell you something: the New York Times is excited.

Read this from an over-the-top piece called “We Ran Out of Words to Describe How Good the Jobs Numbers Are“:

The real question in analyzing the May jobs numbers released Friday is whether there are enough synonyms for “good” in an online thesaurus to describe them adequately.

So, for example, “splendid” and “excellent” fit the bill. Those are the kinds of terms that are appropriate when the United States economy adds 223,000 jobs in a month, despite being nine years into an expansion, and when the unemployment rate falls to 3.8 percent, a new 18-year low.

“Salubrious,” “salutary” and “healthy” work as words to describe the 0.3 percent rise in average hourly earnings, which are up 2.7 percent over the last year – a nice improvement but also not the kind of sharp increase that might lead the Federal Reserve to rethink its cautious path of interest rate increases.

And a broader definition of unemployment, which includes people who have given up looking for a job out of frustration, fell to 7.6 percent. The jobless rate for African-Americans fell to 5.9 percent, the lowest on record, which we would count as “great.”

If anything, some of the thesaurus offerings don’t really do these numbers justice.

They better hope this isn’t the high point for the U.S. economy, because if it is, that’s going to be seen in retrospect as proof they do indeed “ring bells at the top.”

Hyperbole and entertainment aside (because that’s all that puff piece is), what does Wall Street think? Well, the verdict is obviously favorable. Let’s take a quick spin through some of the instant takes.

BofAML

There was little to hate in today’s employment report which should give Fed officials comfort that the economy continues to head in the right direction. Data in the US have been solid in recent weeks. Retail sales, industrial production and the latest employment report all suggest the economy chugging along. Risks are brewing abroad with political tensions in Europe and at home with the latest round of tariffs on aluminum and steel. However, concerns, so far, remain in the periphery and should not materially alter the FOMC’s latest outlook for the economy to run above trend this year. The latest round of US data should keep the Fed on track for a rate hike in June and keep them on track for a gradual path of tightening.

Goldman

The only notable weak spots in the payroll figures were the 8k decline in the temporary help industry and a fourth consecutive drop in federal government payrolls (-3k). Reflecting this, the breadth of job gains was quite firm, with the payrolls diffusion index–the net share of industries adding jobs during the month– rising to 67.6% from 64.0%.

Wage details were firmer than anticipated. Despite negative calendar effects, average hourly earnings rose 0.30% (mom) in May and the year-over-year rate firmed a tenth to +2.7%. The composition of wage gains was less favorable, however, as the strength reflected an outsized gain in the financial activities industry (+1.4%), specifically among its supervisory workers.

Taken together, the May jobs report suggests a solid pace of labor market improvement consistent with a larger overshoot of full employment. We boosted our subjective odds of a June hike to above 95% (from 95% previously).

Credit Suisse

Overall, this report shows continued labor market strength, even as the economy approaches full employment. Job gains have managed to accelerate and the household survey has shown continued decline in both unemployment and underemployment. The rebound in average hourly earnings growth is reassuring after some softness earlier this year, and supports our view that wage growth should rise to the 3.0-3.5% range. With the unemployment rate now at the FOMC’s 2018 median projection and core inflation likely to pick up to 2.0% in the next few months, the Fed is likely to continue their policy of gradually hiking rates. We continue to expect 3 further hikes this year, occurring at the June, September, and December meetings.

Wells Fargo

Rising wages should at least provide a near-term tailwind to luring more workers back into the labor force. Average hourly earnings rose 0.3 percent in May, helped by a 1.4 percent jump in the financial services industry. The year-over-year rate improved to 2.7 percent.

As we have often mentioned, the subdued pace of earnings growth this cycle reflects low productivity growth and inflation. Yet, as cyclical pressures mount and labor becomes increasingly scarce, we expect to see further strengthening in average hourly earnings. Other indicators are also pointing to compensation picking up. The Employment Cost Index was up 2.7 percent year over year through the first quarter, compared to 2.5 percent for 2017, while the share of small businesses raising compensation in May rose to 35 percent–the highest rate in the NFIB survey’s 32-year history. Factoring in the workers added to payrolls and now earning a paycheck this month, the income proxy–total hours worked multiplied by average hourly earnings–has improved to a 5.4 percent annualized pace over the past three months, compared to 3.3 percent at the start of the year.

Stronger earnings and the continued solid pace of job gains keep the FOMC in the clear for a rate hike later this month despite renewed concerns about the European debt crisis and global trade relations.