REPLAY | Employment Conference Call | Labor Market (May)—Braking—Or Breaking? – 6/7/24

Posted June 12, 2024 by rvillareal

Labor Market (May)—Braking—Or Breaking?

The U.S. Labor Market has been superstrong for months-and-months but recent high-frequency data suggest some slowing, cooling, or maybe something worse. Braking? A good thing…Or Breaking? A bad thing.

– Labor Market in May—Jobs (Nonfarm Payrolls, Company Survey); the Unemployment Rate, Persons Working and Looking For Work (Household Survey); Wage Costs (Avg. Hrly. Earns. (AHE))—Measure of Cost-Push Inflation but also Income to Spend
• The Data—What Say?
• Interpretation—What Means?
– Analysis—Braking or Breaking?
• Softening—Definitely
• Falling Out-of-Bed? Not Yet, Not Expected Soon
• “Threading the Needle”—Still Full Employment and Little Sign of Accelerating Price Inflation From Here
– FedThink
• Moving “Sustainably” Toward the 2% Price Inflation Target—Probably Not Yet
• Rebalancing—Probably
• Recession Worry—Not FedThink
• Message of FedThink—Still “Higher for Longer”
– Economic Implications and Scenarios—Baseline Still is Expansion, Recession Still Low Risk
• Expansion (Odds 65%); Recession (Odds 10%); Soft Landing (Odds 20%); Boomy Expansion (Odds 5%)
– Financial Markets—Interest Rates, Equities, Currency
• Fixed Income—On Balance Volatility but Long End Trend Up—5-3/8% Peak Funds Rate, Directionally 4-3/4% 10-Yr. U.S. Treas.
• Equities—Bullish Trend, Economy Pluses Outweight Interest Rate Negatives
• Currency—Dollar Up but Election Becoming a Factor
• Commodity Prices—Stable, Bullish Gold