The May jobs report is expected to show solid gains again





Job gains maintained their impressive run in May, even as government policy makers took steps to cool the economy and ease inflation.

The Department of Labor reported Friday that employers added 390,000 jobs, the seventeenth consecutive monthly earnings.

The unemployment rate was 3.6 percent for the third consecutive month, close to a half-century low. The average hourly wage for employees increased by 10 cents, or 0.3% on a monthly basis, and was 5.2% higher than the previous year.

Record levels of consumer spending, which make up around 70% of the economy, have fostered business expansion and job creation as companies try to keep pace with the demand for a wide variety of goods and services. The hiring push has given some workers an agency rank in terms of pay and conditions that is unfamiliar to both job seekers and employers.

Yet the Federal Reserve is concerned that rising labor costs will be passed on to consumers, limiting efforts to reduce inflation, which is near a 40-year high.

Last month, Fed chairman Jerome H. Powell pointed out that his institution’s attempts to lower prices were part of ensuring a more sustainable form of full employment. “We need to return to price stability so that we can have a labor market where people’s wages are not devoured by inflation,” He said. “And where we can also have a long expansion.”

The environment for job seekers remains as strong as it has been since the 1960s, some economists say. The Kansas City Fed Labor Market Conditions Index, which is based on 24 measures that track market rigidity, is close to the highs last seen in 2000.





In a speech this week at the Memphis Economic Club, James Bullard, president of the Federal Reserve Bank of St. Louis, noted that “real-time indicators” of economic growth suggest that expansion will continue for several quarters.

However, it appears that fewer Americans will be able to fully share in continued expansion. There are growing signs that low-income households, which have been hardest hit by price hikes and have consumed much of the pandemic-era savings, are starting to withdraw discretionary purchases. The cost of food is a growing problem and energy prices, which are about 30 per cent higher than a year ago, are forcing people to make tough decisions about which goods and services to cut to avoid a ‘ further erosion of their budgets.

Inflation has already had a noticeable impact: personal savings as a percentage of personal disposable income fell to 4.4 percent in April, the Department of Commerce reported last week. It was the lowest rate since 2008 and far from abnormally high by 33 percent in April 2020 at the height of federal aid.

Over the course of the year, inflation and general economic volatility created a dissonance between our consumer sentiment and relatively positive raw data. Current accounts are still above 2019 levels for almost all income brackets. And the share of households under duress due to the debt burden is historically low. Auto loan default rates are low. And new bankruptcies and debt collection procedures are at their lowest since the New York Fed began collecting data on them in 1999.

The Fed’s goal is to design a modest economic slowdown that avoids a painful recession. Gregory Daco, chief economist at EY-Parthenon, a consulting firm, insisted that “whether or not we have a recession is not what matters” with respect to the characteristics of any potential recession, such as its depth and duration.

“The recent bias makes us think of a recession like the Covid crisis, or the global financial crisis, but these were ‘every hundred years’ events that are unlikely to repeat themselves in the short term,” he said. “At the same time, the high inflation environment brought comparisons with the 1970s, but again the situation was different, lasting 15 years from the late 1960s to early 1980s and characterized by two recessions moderate and two deep “.