Macroeconomic outlook and labor market analysis (with Katie Greifeld)

Asked about the balance of risks in the economy given recent mixed data showing flat personal income, rising spending/inflation, and dropping home sales.

Katie Greifeld

Stuart Paul

The balance of risk is tilted toward higher inflation for longer. The real question is how much a relatively undynamic labor market will keep inflation pressures contained. Upward pressure comes from energy, a one-time jump in shelter, and items with chip shortages. Prices are fading in discretionary categories where consumers can be more discerning.

Aggregate labor income growth running at about 3.5% annualized, being swamped by inflation, causing households to pull back slightly. Real spending is cooling a little bit.

Asked about expectations for the upcoming jobs report, noting Fed focus has shifted more toward inflation than labor market.

Katie Greifeld

Stuart Paul

Expecting 95,000 jobs added in May, unemployment rate staying around 4.3%. Hiring is concentrated in leisure/hospitality (volatile month-on-month) and healthcare (aging population), not indicative of a dynamic labor market with wage pressures. Expect a very low quits rate in the JOLTS report.

Little employee-induced labor market churn means we won't see wage pressures contributing to spending momentum.

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