Latest / Markets with Megan: A Quick Financial Markets Update / Is the Fed Cornered? Jobs Report Miss Again | S2 E051 | 06-06-25

Transcript

Is the Fed Cornered? Jobs Report Miss Again | S2 E051 | 06-06-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: It was a mixed bag when we saw the details on the employment report.
• 0:03
  Megan Horneman: Today.
• 0:03
  Megan Horneman: It's Friday, June the 6th, and this is Markets with Megan.
• 0:06
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• 0:09
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• 0:10
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• 0:13
  Megan Horneman: And we're here today to talk about the monthly jobs report, which is one of the most important pieces of economic data that we receive each month, and what we saw this morning was that the US economy added 139,000 jobs in the month of May.
• 0:26
  Megan Horneman: It was slightly better than expected, but when you take into consideration the prior two months, we saw net downward revisions of about 95,000 jobs.
• 0:35
  Megan Horneman: So this shows that the payroll and the labor market is starting to weaken.
• 0:40
  Megan Horneman: But let's dig a little bit further into what the Fed will be looking at.
• 0:43
  Megan Horneman: First of all, we saw the unemployment rate stay basically unchanged at 4.2%.
• 0:49
  Megan Horneman: The reason for that, though, was because we saw a pretty big, sharp decline in the labor force itself, as well as the household employment.
• 1:00
  Megan Horneman: So when you see both of those decline, that's what really helped that unemployment rate stay steady, but that does also indicate some weakness underlying in the labor market.
• 1:09
  Megan Horneman: We saw the labor force participation rate also decline.
• 1:13
  Megan Horneman: It's to 62.4 percent.
• 1:15
  Megan Horneman: That was a three-month low.
• 1:17
  Megan Horneman: So again, a little more softening here in the labor market is evident.
• 1:21
  Megan Horneman: Now, when we look at where this basically was driven by, we saw that a pretty big increase from the trade and transportation side of the labor market as well as leisure and hospitality.
• 1:34
  Megan Horneman: So we're still seeing that leisure and hospitality, that labor force is actually still increasing and that's because consumers still are spending there from that experience side of the economy.
• 1:46
  Megan Horneman: When you look at the federal government now this has been highly scrutinized because of what's happened with the Doge effect.
• 1:53
  Megan Horneman: But we saw the fourth consecutive month of payroll declines for the federal government and over the last four months we've lost about 59,000 jobs in the federal government.
• 2:03
  Megan Horneman: The one area that we like to look at is temporary help as well, because if you see some consistent declines in the temporary workforce, then that means that that sometimes can be a leading indicator to layoffs as well, because you will stop temporary hiring before you actually lay out full-time permanent workers.
• 2:22
  Megan Horneman: That actually saw the biggest decline that we've seen in seven months.
• 2:26
  Megan Horneman: So from just the labor market itself, we are seeing some softening here.
• 2:32
  Megan Horneman: This is evident by a lot of the different indicators that we've been reporting on on this podcast.
• 2:37
  Megan Horneman: That's showing this continued softening in the labor market, but it's not necessarily collapsing.
• 2:42
  Megan Horneman: So what we're seeing is that the equity market's up today because this is a soft enough report that it does give the Fed some flexibility to start moving towards another interest rate cut.
• 2:54
  Megan Horneman: We still think that's several months out.
• 2:56
  Megan Horneman: But this is also not showing that the labor market's fully collapsing where we have to worry about some kind of a sharp contraction in economic activity.
• 3:06
  Megan Horneman: Now the one area that the Fed's also going to focus on that we get in this report is the earnings side of this, and we did see another uptick, better than expected, in average hourly earnings.
• 3:17
  Megan Horneman: On a monthly basis, average hourly earnings rose 0.4%.
• 3:21
  Megan Horneman: The expectation was for them only to rise three-tenths and on a year-over-year basis they're rising now 3.9%, which matches the monthly, the year-over-year increase we saw in April.
• 3:33
  Megan Horneman: But if you go up to the 20 months leading up to the pandemic, the average hourly earnings were growing on a yearly basis by only about 2.5%.
• 3:43
  Megan Horneman: We bring this up because if earnings continue to grow at such a robust pace and higher than average, this can be an inflation indicator.
• 3:51
  Megan Horneman: So the Fed's gonna pay close attention to this.
• 3:54
  Megan Horneman: That's why we don't think that they're gonna be ready to jump on cutting interest rates this month or next month.
• 4:00
  Megan Horneman: We still think it's further out into September before we'll see the first rate cut, but it does.
• 4:04
  Megan Horneman: If this continues down this path, with this softening, next month, we still think it's further out into September before we'll see the first rate cut, but it does.
• 4:10
  Megan Horneman: If this continues down this path, with this softening, the Fed will likely be able to continue on their easing cycle.
• 4:13
  Megan Horneman: That's all we have today.
• 4:13
  Megan Horneman: If you want a history of our podcast, you go to marketswithmeganfm.
• 4:16
  Megan Horneman: Thank you.