The Week Ahead for June 6, 2022: Labor market stays resilientJune 6, 2022
The latest news
The macroeconomic picture was cloudy throughout May. Inflation, the war in Ukraine, and China’s COVID-related lockdowns combined to make some observers—like those attending the recent World Economic Forum in Davos, Switzerland—nervous about recession at some point in the next year. Closer to home, the longer inflation stays high, the longer consumer confidence will stay low. Some business leaders are beginning to voice concerns as well, including Tesla CEO Elon Musk, whose “super bad feeling” about the economy prompted a call to cut jobs at the car manufacturer by 10%. (Musk also issued a contrarian edict for employees to return to the office for 40+ hours per week or find another job.)
Through it all, though, the overall labor market has remained strong. If major layoffs are coming, they have yet to begin in earnest, with initial unemployment claims still hovering around 200,000 per week. Furthermore, payrolls increased by 390,000 jobs in May, about 20% more than expected, though still a slowdown from April’s upwardly revised figure of 436,000. The leisure and hospitality sectors once again led the charge, collectively accounting for more than 1 of every 5 new jobs. There may still be more room below the ceiling, as labor force participation remains more than 100 bps below its pre-pandemic level.
There are signs that the labor market may be settling down, however. Job openings pulled back slightly from their record high in May, and wage growth also slowed. Still, solid employment is helping households deal with higher prices, raising hopes for a “soft landing” that brings inflation under control while maintaining economic growth.
Happening this week
TUESDAY, JUNE 7
|Measure:||Balance of Trade, April|
March saw record net imports of nearly $110 billion, which was a key contributor to GDP contraction in Q1. April’s numbers are expected to moderate as the U.S. economy begins to feel the impact of a supply chain slowdown associated with China’s recent lockdowns. A smaller trade deficit for the month would portend less of a drag on Q2 GDP.
THURSDAY, JUNE 9
|Measure:||Initial Jobless Claims, week of June 4|
Initial claims held steady throughout May, consistent with the tight labor market. Given a few high-profile announcements of hiring freezes and layoffs, the number will bear watching in the coming weeks.
FRIDAY, JUNE 10
|Measure:||Inflation Rate, year-over-year for May|
|Measure:||Core Inflation Rate, year-over-year for May|
While higher prices have proven sticky and are expected to remain so, the hope is that inflation has reached its peak and will begin to slow this summer. Core inflation, which excludes more volatile energy and food prices, is closely watched by the Federal Reserve as it considers monetary policy. A series of 50-bp interest rate increases in the coming months appears locked in absent a major surprise.
|Measure:||Michigan Consumer Sentiment, preliminary for June|
Consumer sentiment will likely remain near its lowest level since 2011 as households fret over inflation and news of layoffs at some businesses.
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