The week in review
- Consumer confidence fell to 102.3 in May
- JOLTS openings rose to 10.1M in April
- Nonfarm payrolls increased 339,000
The week ahead
- Services ISM
Thought of the week
Last week, investors received a large bundle of data related to the jobs market. There is some indication of future weakness, but overall the jobs data mosaic points to normalization at a gradual pace. The May employment report showed a net creation of 339,000 jobs, above expectations and an uptick compared to April’s 264,000. Some signs of softness included a move higher of 0.3% in the unemployment rate to 3.7%. In addition, wage growth eased to 0.3% m/m, bringing the year-over-year rate down to 4.3%.
The April JOLTS data was also mixed: job openings were surprisingly high, moving up to 10.1M, the first increase this year and still significantly above the 2019 average. On the other hand, the quits rate fell to 2.4%, its lowest level since February 2021, edging closer to the 2019 average. This signals that workers feel less comfortable leaving their jobs or that the quality of jobs available is potentially declining. Overall, the labor market is showing signs of stabilization rather than weakness, bolstering the possibility of a soft landing.
Historically, spikes in unemployment have significantly lagged the onset of rate hikes. However, given the speed and intensity of the recent tightening regime, it would not have been surprising to see a greater rise in jobless claims and layoffs already taking shape. The labor tightness created by the pandemic recovery may be helping the job market avoid any sudden drop-offs.
We think recent data supports a Fed pause at the June meeting, as it waits to see which way the labor market data breaks: normalization or a bigger slowdown.