Friday, June 7th, 2024
The all-important Employment Situation report is out this morning, an hour ahead of the opening bell. Results from the Bureau of Labor Statistics (BLS) for May are well beyond projections: 272K new non-farm jobs were filled last month, far more than the 190K expected. This is augmented slightly by the -10K positions removed from April’s tally, now to 165K, and -5K from March, now at 310K. The Unemployment Rate ticked up 10 basis points (bps) to 4.0%.
Let’s get the bad news out of the way. While it’s nice to see a strong domestic labor force in a general sense, from the perspective of bringing down interest rates from historic highs they’ve maintained closing in on a full year, a seller’s market in employment — today’s 272K is notably above the 12-month average of 232K new non-farm jobs created per month — fosters inflation rather than flattens it. The higher the demand for labor, the higher the price that must be paid for it.
Thus, we see Hourly Earnings up +0.4% last month. This is up from the +0.3% expected and the +0.2% reported a month ago — which gave investors hope that employment was at last beginning to dampen inflation metrics. This is the highest we’ve seen since January’s +0.5%, which hadn’t been reached prior since March of 2022. Year over year, Hourly Wages are +4.1%, 20 bps higher than the expected +3.9%, which would have been in-line with the previous month.
Healthcare jobs led the way with 68K new positions filled in May. Government hiring was strong at 43K (and completely unaccounted for in ADP’s private-sector payrolls reported on Wednesday), and Leisure and Hospitality, which we had begun to believe was on the wane, reached 42K new hires last month. Labor Force Participation shrank 20 bps to 62.5%, the lowest since February (and January 2023 previously), while U-6 (aka “real unemployment”) came in at 7.4% — historically healthy but the highest monthly total since November of 2021.
Pre-market futures did not like these numbers. Immediately ahead of the report hitting the tape, the Dow was +11 points, the Nasdaq +26 and the S&P 500 +2. Within 10 minutes of early trading after the results were released, these sank to -233 points, -114 and -33 points, respectively. Bond rates rose to 4.404% on the 10-year and 4.851% on the 2-year. Odds of a rate cut, already off the table for June, fell to only +9% for July and +55% for September. The hockey sticks continue to elongate their handles.
After the opening bell, we’ll see results for Wholesale Inventories in April and Consumer Credit in May. Next week brings us fresh inflation data with Consumer Price Index (CPI) and Producer Price Index (PPI) reports for May. These include what’s known as the Inflation Rate (headline CPI year over year), which a month ago reached +3.4%, which is roughly the median we’ve seen over the past 12 months. Core CPI year over year dropped to +3.6% for April, the lowest rate in three years.
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Labor Heats Up Again: Jobs +272K, Unemployment +4.0%
Friday, June 7th, 2024
The all-important Employment Situation report is out this morning, an hour ahead of the opening bell. Results from the Bureau of Labor Statistics (BLS) for May are well beyond projections: 272K new non-farm jobs were filled last month, far more than the 190K expected. This is augmented slightly by the -10K positions removed from April’s tally, now to 165K, and -5K from March, now at 310K. The Unemployment Rate ticked up 10 basis points (bps) to 4.0%.
Let’s get the bad news out of the way. While it’s nice to see a strong domestic labor force in a general sense, from the perspective of bringing down interest rates from historic highs they’ve maintained closing in on a full year, a seller’s market in employment — today’s 272K is notably above the 12-month average of 232K new non-farm jobs created per month — fosters inflation rather than flattens it. The higher the demand for labor, the higher the price that must be paid for it.
Thus, we see Hourly Earnings up +0.4% last month. This is up from the +0.3% expected and the +0.2% reported a month ago — which gave investors hope that employment was at last beginning to dampen inflation metrics. This is the highest we’ve seen since January’s +0.5%, which hadn’t been reached prior since March of 2022. Year over year, Hourly Wages are +4.1%, 20 bps higher than the expected +3.9%, which would have been in-line with the previous month.
Healthcare jobs led the way with 68K new positions filled in May. Government hiring was strong at 43K (and completely unaccounted for in ADP’s private-sector payrolls reported on Wednesday), and Leisure and Hospitality, which we had begun to believe was on the wane, reached 42K new hires last month. Labor Force Participation shrank 20 bps to 62.5%, the lowest since February (and January 2023 previously), while U-6 (aka “real unemployment”) came in at 7.4% — historically healthy but the highest monthly total since November of 2021.
Pre-market futures did not like these numbers. Immediately ahead of the report hitting the tape, the Dow was +11 points, the Nasdaq +26 and the S&P 500 +2. Within 10 minutes of early trading after the results were released, these sank to -233 points, -114 and -33 points, respectively. Bond rates rose to 4.404% on the 10-year and 4.851% on the 2-year. Odds of a rate cut, already off the table for June, fell to only +9% for July and +55% for September. The hockey sticks continue to elongate their handles.
After the opening bell, we’ll see results for Wholesale Inventories in April and Consumer Credit in May. Next week brings us fresh inflation data with Consumer Price Index (CPI) and Producer Price Index (PPI) reports for May. These include what’s known as the Inflation Rate (headline CPI year over year), which a month ago reached +3.4%, which is roughly the median we’ve seen over the past 12 months. Core CPI year over year dropped to +3.6% for April, the lowest rate in three years.
Questions or comments about this article and/or author? Click here>>