Hot Jobs Report Leaves No Room For Timid Fed
The US economy added 390,000 jobs in May, Friday's NFP report showed. That was more than expected (figure below). Consensus was at 317,500 when the numbers were released. The headline print counted as "hot," certainly by pre-pandemic standards, but also in the context of forecasts. The range of estimates, from nearly six-dozen economists, was 220,000 to 450,000. There's little evidence to suggest the labor market is rolling over and that, in turn, makes the case for a resolute Fed in the face
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Employment is a lagging indicator. Leading indicators suggest the economy is slowing. Does that mean the Fed should pause? Maybe not- slowing may not mean recession, but things are fairly quickly balancing between supply and demand. After the Fed raises rates in June/July we could well be at neutral. One thing these last two years is teaching everyone is how quickly the economic environment can shift. The market basket for consumers in the US is rapidly adjusting. Many of the economic statistics, and company earnings are starting to reflect this.