The labor market is still strong even though the pace of job growth is expected to have slowed in May.
Employers are expected to add 328,000 new jobs, less than the 428,000 added in April. The unemployment rate is expected to go down.
Wages are expected to have increased by 0.4% in May. Wage growth is expected to fall slightly from April to year-over-year.
Michael Schumacher is head of macro strategy at Wells Fargo. The Fed has been consistent when it comes to inflation. You might get a reaction if it's less than 0.5%. It's pronounced if it's 0.6%.
If the payrolls number misses the forecast, the market may not react as much as it would if the wage number was higher. The yield goes higher when bonds sell off.
As the Federal Reserve raises interest rates, the payroll data is being closely watched. It is a part of the economy that is expected to remain strong for the time being.
We already have more real-time data that gives us a better indicator. The weekly unemployment claims fell to a low of 200,000.
There are anecdotal reports about a firm cutting jobs. He said that it is either that it isn't happening yet or that people are being let go and immediately find another job.
Monthly job growth has been well above 400,000 for the past year, and economists say just based on the short supply of workers, it will inevitably slow down.
375,000 payrolls are expected to be added in May, according to an economist.
From here on, we think the momentum is going to slow down. The labor market is like that. The participation rate is expected to gradually increase. The number fell by 0.2 in April. We expect a small improvement.
Economists watch the participation rate to see how many people who are able to work have jobs. In the month of April, the rate was 62.3%.
The impact of returning workers is expected to be shown in May's payroll data. There is a group of people who want to return to the labor market because Covid restrictions have been loosened.
The labor market was short 1.2 million workers in April, but economists say that many people have retired.
A lower trajectory for job growth is what we're likely to settle into. In the spring of 2020, the participation rate fell due to Covid. There isn't a lot of people who are out of the labor force and on the verge of being brought back in. There are roughly two job openings for every person who is out of work.
The markets don't believe that the economy is going to slow down and cause the Fed to stop hiking interest rates. The central bank raised rates by half a percentage point last month and is expected to do the same in June and July.
When people say the economy is weak, they are just thinking about the housing data. The housing data is not good.
The real estate market has been affected by higher mortgage rates and home prices. The decline in existing home sales was the lowest since the beginning of the Pandemic.
The market is adjusting to a huge increase in the cost of financing home purchases. The Fed would like that. I don't think the housing market is collapsing. The ISM manufacturing data shows a strong economy.
He said that a strong labor market and wages will support consumer spending.
Diane Swonk, chief economist at Grant Thornton, believes that the housing market could be an indicator of the economy.
She thinks that the job market will be hurt by Fed tightening. During the summer and into the fall, she expects job growth to decline. She said it could fall back to a normal pace of 186,000 payrolls per month.
She said that they could see some decline. The unemployment rate is higher than the current rate and Fed officials are starting to frame out what a soft landing is. It's difficult to get there without some job losses.
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