New Econ Reports Ahead Of Jobs Numbers Friday

Monday, May 30th, 2017

Starting this holiday-shortened week as calendar Q2 draws to a close tomorrow, both the S&P 500 and the Nasdaq indexes are coming off all-time highs for the second-straight session. Both are looking for 7 straight months of market gains, which for the Nasdaq would be the longest winning streak since February 2015. On Friday we get a look at the Bureau of Labor Statistics (BLS) non-farm payroll report for May, but we see plenty of other data this week, as well.

Personal Income and Spending results for April were reported ahead of today’s opening bell, with +0.4% reads for both in-line with estimates. One notable revision from the previous report was in spending for March, moving from unchanged to +0.3%. Wages and Salaries for April blossomed +0.7%, which is the strongest sign from this overall report that inflation is indeed flowing into the domestic economy.

A new Small Business Employment report for May from payroll services company Paychex (NASDAQ:PAYX) illustrates that jobs growth for companies with less than 50 employees continues to slow. This is the third straight down month for small business employment — down in all regions, albeit nothing close to 1% in any of them. Tennessee was the top state for small-business job growth for the month, and Dallas, TX was the top metro area for jobs growth at small companies.

These reports check some of the smaller boxes for Fed presidents who will convene in a couple weeks to decide on whether or not to raise interest rates another 25 basis points. Odds remain very favorable that the Fed will indeed raise rates in June, although economic growth overall appears more tepid than some analysts had expected we’d see by this point in the year.

Jobs growth is slowing because the positions to be filled aren’t finding the skill level matches as easily as when the labor market was posting occasional 300K+ new jobs numbers in recent years. And until we see major increases in home pricing across the country going forward, we expect to see inflation trickle into the market rather than hit with a big splash.

These sorts of findings are what is keeping some market participants from getting on board with a new interest rate hike mid-June. Not to suggest it’s not happening, but hotter numbers would certify the coming move more solidly.

Mark Vickery
Senior Editor

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