Solid Employment Number Underlines Current US Strength

May US employment data showed an unexpected surge in job growth, complicating the Fed's path toward potential interest rate cuts. The resilient labor market, coupled with persistent inflation risks, is forcing a reassessment of current policy forecasts.

Key Takeaways

• 1.US employment growth in May (172k) significantly exceeded consensus expectations (88k).
• 2.The Fed may shift toward neutral guidance as the labor market remains resilient.
• 3.Strong payroll gains are difficult to reconcile with stagnant labor supply, increasing the likelihood of unemployment rate declines.

Table of Contents

• Key points
• Another hefty upward surprise in employment
• Wage growth not an inflation problem
• Both cyclical and non-cyclical jobs growth
• Unsustainable job growth given weak supply developments
• Strong economy challenges our forecast for a December cut