Source: Economics Group of Wells Fargo Bank, N.A.
Summary
The employment situation report for April kicked off the second quarter with signs that the labor market is cooling. Nonfarm payrolls increased by 175K in the month, below consensus expectations for a 240K gain, while the unemployment rate rose a tenth to 3.9%. Meantime, average hourly earnings growth slowed and, at just 3.9% year-over-year, is not too far above the 3.3% average that prevailed in 2019.
Overall, today’s data point to a jobs market that is still tight, but not nearly as hot as it was a year or two ago. This should support a further slowdown in inflation as the year progresses, even if improvement proceeds only gradually. We think it is unlikely the FOMC will be ready to start cutting rates by its next meeting in June, but our base case for the first rate cut to occur at the September 18 FOMC meeting remains firmly in play based on today’s employment data.