Hiring still hot
Weekly Bond Commentary
The missing workers reappeared, and that makes the Federal Reserve’s job harder.
Weekly jobless claims fell in the latest week, to 242,000 from 264,000 the previous week. It was reported that there were unusually large filings in Massachusetts, which the state’s labor department has said are fraudulent. The state accounts for 2.2% of the national labor force, but in last week’s filings, it represented nearly 15% of the total. So, back to a relatively low level of filings.
Why this matters is that it confirms the labor market remains tight. Job openings have fallen from their peak in March 2022, but remain well above pre-pandemic levels. The unemployment rate of 3.4% reinforces the notion that workers continue to have the upper hand relative to management. This tension has already led to more pay increases and lower profit margins at companies already dealing with higher freight, energy and other costs. As long as workers have money, they will continue to spend, and increasingly, save.
In April, consumers did indeed spend. Retail sales rose 0.4%, slightly below forecast, but excluding auto and gasoline sales, sales climbed 0.6%, far more than expected. Continuing the trend of stronger economic data, industrial production rose 0.5% in April, and the NAHB housing market index jumped to 50 in May from 45 in April. Both the present and expected sales index data rose more than expected, and prospective buyer traffic rose. It would appear that reports of the economy’s demise are premature, and, again, this makes the Fed’s job more difficult as it tries to slow growth just enough to stamp out inflation without causing a recession.