'People keep getting jobs': unemployment has been and remains at or near 50-year lows.
Economists impressed by latest jobs report as wages grow.
Economists were surprised and impressed with the May jobs report, and there are some significant facts in the data they’re praising that affect everyone in America.
“People keep getting jobs.”
That’s how Washington Post columnist Heather Long explains the just-released May jobs report: “Another big jobs report. The US economy added 272,000 jobs in May, blowing past expectations of ~190k. People keep getting jobs, esp. in healthcare., gov’t and hospitality.”
“This labor market just won’t quit,” observed Washington Post columnist Catherine Rampell, calling the slight rise to 4% “still pretty damn good!”
“Labor force participation rate for prime-age workers at highest level since 2002,” she noted, adding: “Prime-age women’s labor force participation rate at highest level EVER.”
Martha Gimbel, a former Senior Advisor at the White House Council of Economic Advisers, put today’s numbers in context: “For reference, average job growth was around 170K in 2019 so job growth around 250K (50 percent above the pre-pandemic average) is not too shabby.”
She also took a dig at analysts who had predicted far worse results: “Once again, payroll growth laughs at your expectations.”
The unemployment rate did tick up just a slight amount, to 4.0%, the first time it’s hit that number in over two years. Despite what the general public believes, under President Biden unemployment has been and remains at or near 50-year lows.
Last month The Guardian reported a Harris Poll found 49% of Americans “believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.”
Four years ago, the May 2020 jobs report showed unemployment had dropped to 13.3%, from 14.7% in April 2020 – that’s more than triple where we are now.
Center for American Progress vice president of research Will Ragland sums up the current state of the economy, focusing on these four facts: “15.6 million jobs created under Biden administration. Labor force participation for prime-age workers is at its highest in over 20 years. Women’s employment rate hit another high. Unemployment remains at historical lows.”
Barron’s notes that wages are growing, “at the fast rate since January.”
“Americans’ average hourly earnings rose faster than expected in May, up 0.4% from the previous month, according to the Bureau of Labor Statistics on Friday. That was 4.1% higher than a year ago and compared with the consensus estimate of 0.3% growth, per FactSet.”
Howard Forman, Yale University professor of radiology, economics, public health, and management notes today’s unemployment report is not “good news for stock or bond markets. (or those looking for lower interest rates) But the silver lining is that REAL (inflation adjusted) wages are growing strongly. Great news for labor.”
He also pointed out four facts, writing: “What might be temporarily bad news for Capital markets is great news for Biden.
1. Very strong labor markets (continuing record job creation).
2. Increasing REAL wages.
3. Declining inflation.
4. Growing economy.”
After two days of debate, the Fed will publish its interest rate decision on Wednesday afternoon and will also update its economic forecasts from March.
Most analysts expect the data since March will cause the FOMC's 19 members to lower the number of cuts they expect this year, bringing the median number down from three to two.
"At the June FOMC meeting, we see the Fed revising its outlook in favor of slower growth and firmer inflation," Bank of America economists wrote in an investor note published Friday.
"It should project two rate cuts this year and a cutting cycle that begins in September," they said, adding that the FOMC would likely need to see more evidence of disinflation before beginning to cut interest rates.
Fed chair Jerome Powell has repeatedly insisted that the Fed is "data-dependent" and will not be swayed by politics.
Nevertheless, a September start to rate cuts would thrust the Fed into the middle of a fractious presidential campaign between President Joe Biden and his Republican opponent, Donald Trump, who has previously questioned the US central bank's independence.
- Cutting back -
Futures traders see almost no chance of a rate cut before September, according to data from CME Group.
In recent days, they have also sharply lowered their expectations of a September cut, assigning a probability of around 50 percent on Friday that the Fed would not start easing monetary policy before November.
This marks a dramatic shift from late last year, when the financial markets were pricing in as many as six interest rate cuts for 2024, with the first of them coming as early as March.
"At this juncture, there is little reason to think that the FOMC will prioritize downside risks to employment over the much more salient risk of sustained high inflation," economists at Barclays wrote in a recent investor note.
"As such, this should keep rates on hold for the next few meetings as the FOMC awaits evidence that (will) restore its confidence that inflation is moving sustainably toward the 2% target," they said, adding they still expect the Fed to make just one rate cut this year, most likely in December.
But with the data still painting a mixed picture, he is unlikely to rock the boat too much this week, according to Oxford Economics chief US economist Ryan Sweet.
"Powell will stick with the Fed's mantra that monetary policy is flexible and will respond as appropriate," he wrote in a recent investor note. "Therefore, it would be surprising if his presser altered our subjective odds of a cut in September."
