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Ahead of Wall Street

Friday, June 2nd, 2023

The long-awaited May nonfarm payrolls survey from the U.S. Bureau of Labor Statistics (BLS) is out this morning, and it’s provided a big surprise on at least two levels: a headline of 339K jobs were filled last month, close to double the expected 190K, and the strongest monthly labor figure since January’s 472K. We’re now averaging 314K new jobs per month in 2023. The Unemployment Rate rises 20 basis points (bps) to 3.7% from 3.4% posted a month ago.

April’s tally was revised up by another +39K positions filled, while March numbers are down to 217K from the originally posted 236K. The last time we saw a higher Unemployment Rate was back in February of 2022; we matched this 3.7% last October. And while this may seem, at a glance, that higher jobs totals are at odds with higher unemployment figures, keep in mind these things can happen, particularly when more Americans (re)enter the workforce.

That said, Labor Force Participation stayed pat at 62.6% — the third-straight month at this level, which is also the cycle high. The Average Workweek ticked down to 34.3 hours, while the U-6 (aka “real unemployment”) reached 6.7% for the month — half way between the 6.8% high and 6.6% low we’ve seen this cycle. Lots of numbers here, some of which may be augmented on future revisions, but nothing to indicate the labor force is anything but remaining healthy.

By industry, we see a big discrepancy from yesterday’s private-sector payroll report from ADP ADP, where the Leisure & Hospitality sector reportedly brought in more than 200K new jobs last month. The BLS figure is 48K for Leisure & Hospitality, which came in fewer than Professional & Businesses Services (64K), Government (56K) and Healthcare (52K). The ADP and BLS numbers rarely align in real time; usually modifications over time bring their narratives more consistent with one another.

Finally, Hourly Wages came in as expected at +0.3% — down, thankfully, from the unrevised +0.5% reported a month ago. In February we saw cycle lows of 0.0%, so today’s number is right in between. This is where the inflation concerns exist in the labor market: higher wage increases. Year over year, this figure comes down to +4.3% from a downwardly revised +4.4% for April. If there’s anything in this jobs data that will keep the Fed considering its pause in interest rate hikes mid-month, its that wage increases are moderating.

Pre-market trading is sanguine at this hour. The Dow was registering +136 points directly prior to the BLS report; it’s +204 points now. The S&P 500 went from +18 points to +23 points, and the Nasdaq — easily the best-performing index for the past week, month and year — has ticked down from +69 to +62 points. Passage of as debt-ceiling deal may indicate something of a relief rally, and currently it does not look as if market participants are pricing in another Fed rate hike. There are worse developments; we’ll take the win for now.

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