Labor Market Preview (with Katie Greifeld)

Stuart Paul expects 95k job gains and 4.3% unemployment for May. He argues the labor market is 'treading water'—headline hiring is narrow, concentrated in healthcare and professional services, not cyclical. Real wage growth is weak, and inflation risks are skewed to the downside as a cool labor market will keep a lid on core inflation.

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Labor Market Preview (with Katie Greifeld)

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Paul notes wealth effects are sustaining consumer spending, which supports tech/growth stocks, but the narrow breadth of hiring suggests caution.

yields

Paul argues the labor market is cool and will keep a lid on core inflation, suggesting no imminent pressure on yields from labor-driven inflation.

Mixed labor data this week: JOLTS and ADP beat expectations, but initial claims rose. How does this set up for tomorrow's payrolls?

Katie Greifeld
Stuart Paul

We expect 95k job gains for May, unemployment steady at 4.3%. The apparent contradiction between increased layoffs and hiring is resolved by recognizing hiring breadth is exceptionally narrow—concentrated in professional business services and healthcare, which is not cyclical.

Aggregate personal income growth is being swamped by inflation. This is not a dynamic labor market; it's treading water, enough to maintain nominal spending but not generate real economic activity.
Is the Fed's shift in focus from labor to inflation premature?

Katie Greifeld
Stuart Paul

Not premature—elevated tax refunds and wealth effects sustain consumer spending despite inflation. But this is not a wage-price spiral. The cool labor market will keep a lid on core inflation. The risk is skewed to low real wage gains containing inflation, not credit-induced acceleration.

The question for the Fed: do low real rates lead to credit-induced acceleration, or do low real wage gains contain inflation? I think the latter.

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