Jobs Report & Fed Outlook (with Carol Massar, Tim Stenovec)

Strong May jobs report (hiring surge, steady 4.3% unemployment) boosts Fed hike bets. Wages grew but at a 4-year low (3.4% YoY), suggesting incomes lag inflation. Labor force grew only 83k after months of decline. Market now prices ~50% chance of a hike by year-end, but one-month data is volatile. New Fed Chair Warsh faces a hawkish tilt; first meeting likely holds rates steady with hawkish guidance.

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Michael McKee 4.0

Jobs Report & Fed Outlook (with Carol Massar, Tim Stenovec)

ndx

McKee discusses the tech selloff context (Nasdaq down 3.2%+), linking it to rate hike fears from the strong jobs report. Higher yields pressure growth/tech stocks.

yields

McKee notes the market is pricing a ~50% chance of a rate hike by year-end, with yields moving higher. He implies the Fed is more likely to hold or hike than cut, given strong jobs data and broadening inflation risks.

Michael McKee

The May jobs report is definitely strong and suggests the labor market has stabilized or is expanding. Companies that held off hiring due to tariffs/war uncertainty may now be adding. Gains were concentrated in local government (school year-end) and leisure/hospitality. This doesn't guarantee we're 'out of the woods' but allows a victory lap for now.
Michael McKee

There is no month-to-month data showing native-born Americans are rushing into jobs previously held by immigrants. The labor force has fallen significantly; this month's 83k increase is the first in six months. The immigration policy impact is visible, but not as a crowding-out effect.
Michael McKee

The political side is key: average hourly earnings fell to 3.4% YoY (a 4-year low), while CPI/PCE run over 4%. People's incomes are not keeping up with inflation, creating a political issue for the administration this fall even if jobs are created.
Michael McKee

New Fed Chair Kevin Warsh faces a difficult situation: all economic data now points away from rate cuts. A strong job market suggests the economy doesn't need lower rates. If inflation broadens beyond energy, a rate increase would be called for. Beth Hammack (Cleveland Fed) already signaled the Fed may need to act soon if inflation doesn't come down.

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