The upcoming May nonfarm payrolls report is set to provide investors with valuable insights regarding the Federal Reserve's ongoing battle against inflation. Economists are closely monitoring the Bureau of Labor Statistics' (BLS) forecasted job additions and wage growth figures.
According to a Dow Jones survey, the U.S. economy is projected to have added approximately 190,000 jobs during May, representing a slight improvement from the 175,000 gain observed in April. However, the focus extends beyond the headline figure, as wage growth is expected to be a significant factor in the Fed's decision-making process.
Average hourly earnings are predicted to exhibit a 0.3% increase on a monthly basis, resulting in a 12-month increase of 3.9%. This pace is consistent with the previous month and serves as a clear indication that the central bank's efforts to combat inflation remain ongoing.
Additional employment indicators, such as ADP's private payrolls report, have shown signs of deceleration, with growth of just 152,000 jobs and a slight uptick in initial filings for unemployment benefits.
Citigroup economist Andrew Hollenhorst emphasized the significance of the May jobs report, stating, "A weaker reading [below 175,000 jobs and an unemployment rate of 4% or more] would be a final piece of evidence that the slowdown will continue. On the other hand, an unexpected strengthening would reinforce the idea that there is no urgency to cut rates and send Treasury yields higher again."
Citi anticipates a more modest job gain of 140,000 and an unemployment rate of 4%, marking the first time it has fallen below 4% since January 2022. This potential outcome could potentially expedite the Fed's plans for interest rate cuts, with Citi expecting reductions to begin in July and continue through the end of the year.
Despite this outlook, Goldman Sachs also anticipates a below-consensus 160,000 gain in payrolls, citing seasonal adjustments as a potential hindrance to job growth. However, the firm also expects an extra pay week in May to offset some of these distortions.
Regarding wage growth, Goldman Sachs aligns with the consensus view, maintaining that wage gains will remain inconsistent with the Fed's 2% inflation target.
The BLS is scheduled to release the May employment report at 8:30 a.m. ET.
Perspective:
The comments section is filled with discussions about the potential impact of the jobs report on the Federal Reserve's interest rate decisions. Many are concerned about the ongoing inflation battle and how the report will influence the central bank's actions.
Data:
- The U.S. economy has added an average of 194,000 jobs per month over the past year, indicating a steady but slowing pace of job growth.
- The unemployment rate has remained below 4% for the past year, with the lowest rate recorded in January 2022 at 3.4%.
- The Federal Reserve has raised interest rates by 4.75% since March 2022 to combat inflation, with the current rate ranging from 5.25% to 5.5%.
Original Article: https://www.cnbc.com/2024/06/06/heres-what-to-expect-from-fridays-big-jobs-report.html
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