The U.S. Economy Created 253,000 Jobs in April, Well Above the Estimate of 180,000… The unemployment rate remained unchanged, at 3.4%.
What it means— It’s time for revisionist history. While the headline jobs number looked hot, the revised numbers for the last two months did not. The February number was revised down from 326,000 to 248,000, and the March number was lowered from 236,000 to 165,000. That makes you wonder if the U.S. Bureau of Labor Statistics (BLS) will reduce the April ﬁgures in June, bringing them much closer to the estimated 180,000. On the income side, the BLS reported that average hourly earnings rose 0.5% last month, which puts it up 4.4% over the last year. That’s still down 0.6% from March inﬂation numbers, but we get new consumer price data next week. If inﬂation has fallen to 4.4% or below for the past 12 months, then workers might have eked out a tiny, real income gain for the ﬁrst time in years.
Stock futures initially jumped on the news, but the joy might not last. Steady jobs data give the Fed cover if it holds rates above 5% throughout the year, and the central bankers want to see income fall, not move higher.
Federal Reserve Raises Overnight Rates to Range of 5.00% to 5.25%, Chair Powell Says Bankers Expect at Most a Mild Recession… The members of the Fed’s Federal Open Market Committee (FOMC) voted unanimously to raise rates by 0.25%, and their monetary policy statement reports that they will keep a sharp eye out for inﬂation.
What it means— The Fed’s statement and Chair Powell’s press conference didn’t give any hints about the central bank taking a softer tone in the months ahead. Like last time, the bankers said they will monitor many factors in deciding what to do next with rates, including how recent rate hikes have affected the economy, the strong jobs market, and ﬁnancial developments. That last bit is a shout out to failed banks and those teetering on the edge to let them know that the Fed sees them but isn’t ready to help them just yet.
The longer rates remain elevated, the more likely it is that regional banks give up the ghost, as their clients’ cost of hedging higher rates collides with declining commercial building rents. Chair Powell also mentioned that the bankers are watching the Senior Loan Ofﬁcer Opinion Survey (SLOOS). If more banks crater, then SLOOS would shoot to the moon as lenders try to hold on to deposits. If this happens, then the Fed will have tamed inﬂation by ruining the banks. That doesn’t sound like a smart move.
Job Openings Fall Farther Below 10 Million, Lowest Level in Almost Two Years… After topping 10 million for the ﬁrst time ever in June 2021, job openings reached just over 12 million in March 2022 before receding and now sit at 9.6 million.
What it means— While declining job openings are good in the Fed’s world because it means a slower economy, dipping just below 10 million doesn’t exactly show that we’re falling into a recession. Before 2021, we would have considered 9.6 million job openings to be a blockbuster number, and we still should see it that way. The same goes for job openings per unemployed worker. While the ratio famously rose above two jobs for each unemployed person early in 2022, the number dipped to 1.6 jobs per unemployed worker last month. It sounds like the air is coming out of the employment balloon, but we have to remember that the ratio had never been higher than 1.2 openings per unemployed worker before the pandemic. Along with all things pertaining to employment, the Fed will watch these metrics for conﬁrmation that it can keep rates higher for longer as it waits for inﬂation to drop near its target.
Initial Jobless Claims Up from 229,000 to 242,000 Last Week, but Continuing Claims Fell From 1.84 Million to 1.81 Million… Initial jobless claims are back near their highest levels since 2021.
What it means— Meh. Initial jobless claims are creeping higher, but nothing about it screams recession yet. And continuing jobless claims dipped a bit and remain at very low levels. There’s nothing to see here, which might be the takeaway. As part of its mosaic of building a softer economy, the Fed wants employment to lose steam. As long as jobless claims remain muted and the unemployment rate remains low, the central bankers likely will hold rates over 5%.
Two Men and a Woman Found in a Car in Scotland With $9,000 of Heroin, $3,500 of Cocaine, a Bag of Chips, and a Lamb… Were they wearing Fedoras? The headline brings to mind the famous Dan Ackroyd line from Blues Brothers, “It’s 106 miles to Chicago, we’ve got a full tank of gas, half a pack of cigarettes, it’s dark, and we’re wearing sunglasses.” Scottish police pulled over the vehicle, and then a police dog named Billy sniffed out the drugs. While the heroin and cocaine seem obvious and the chips make sense, there’s no word on why they were traveling with a baby sheep.
Data supplied by HS Dent Research
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