Monday, June 3rd, 2024

We enter a new Jobs Week rather quietly. By the end of Friday, we’ll have seen new JOLTS numbers, the ADP private-sector jobs report, Weekly Jobless Claims and the full Employment Situation report for the month of May. You’ll recall that April posted the second-fewest job gains of the past year, at 175K, which followed the single-highest month for the domestic labor force, at 315K. Friday’s tally might give us a better idea of which way jobs are really headed.

Many analysts see downside risk here. As we continue to look for weakness in the domestic economy which would help convince the Fed to lower interest rates — remember the outlook from the start of the year: we were supposed to be just about to begin our rate-cut cycle this month (or had already begun), which has now been taken off the table — one key element would be erosion in the labor market. However, the last six months of Friday jobs reports averaged a gain of +242K; the previous six months was +224K.

That said, a downward shift from last month’s 175K reported jobs would suggest a new scenario. After all, with retiring Baby Boomers leaving notable gaps in domestic employment, 100-120K new jobs would be required just to account for those losses. This also helps keep labor costs relatively under control, with lower-paid younger workers supplanting retiring senior members at higher salary points. All of this — assuming we don’t crash through the floor on Friday morning — would be a good thing for the market, with increasing chances of lower interest rates on our calendar.

Regardless, don’t expect June to be the first quarter-point rate cut. The next Federal Open Market Committee (FOMC) meeting begins a week from tomorrow, with a decision on rates the following day. Interestingly, as the economic reports calendar has it, that same day we’ll see a new Consumer Price Index (CPI) report, complete with a new Inflation Rate (year-over-year headline CPI). We haven’t seen the Fed change its mind in the middle of a FOMC meeting on rate policy in a long time, and it’s not very likely it’ll happen this time, but the potential is there — if the CPI data is bad (or good) enough.

After today’s open, we will see a few economic prints. These include S&P flash Manufacturing PMI and ISM Manufacturing for May and Construction Spending for April. None of these have the impact of a big swing in the Employment Situation or CPI data, but in aggregate they can subtly help move the needle. There will also be a decision on interest rates from the European Central Bank (ECB) this week, as well as still more earnings reports from cybersecurity firm Crowdstrike CRWD, Dollar Tree DLTR, lululemon LULU and Chinese automaker Nio NIO.

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