US Nonfarm Payrolls Employment Upturn Risks Clash With Tight Labour Supply

May non-farm payrolls exceeded expectations at 172k, suggesting a robust labor market that complicates potential interest rate cuts. The author expects this strength to be temporary as headwinds like declining real wages and diminishing AI investment persist.

Key Takeaways

• 1.May non-farm payrolls rose by 172k, significantly higher than the 88k consensus, signaling robustness in the US labor market.
• 2.The firm employment data makes a Federal funds rate cut by the incoming Fed Chair Kevin Warsh unlikely.
• 3.Current strength in payrolls is expected to be temporary, driven by transitory factors like tax refunds and AI infrastructure investment.

Table of Contents

• No rationale for a Warsh cut
• Strong labour demand probably temporary
• Time to test constrained supply?

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