Pimco: U.S. Jobs Report

Pimco: U.S. Jobs Report

8 mei 2023

Verenigde Staten Arbeidsmarkt
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What happened? The April U.S. jobs report once again illustrated a very resilient labor market, which added over 250K new jobs despite layoff announcements across industries, and rising unemployment claims. The unemployment rate fell to 3.4% and wage inflation reaccelerated to 4.4%.

What should we expect? The strength in the labor market reflects a very resilient and robust economy – one that is operating at or below full employment –  and is consistent with a range of price and wage indicators which appear stuck around 4-5% - higher than what would be consistent with the Fed’s 2% inflation goal. Nevertheless, the outlook has darkened, as banks face growing headwinds from a rising cost of capital that should slow loan growth and exert a potentially substantial drag on GDP in the quarters ahead.

Bottom line? Monetary policy makers face what we are calling a “two handed economy.” On the one hand, resilient labor markets and sticky inflation is consistent with additional rate hikes. On the other hand, however, banking sector stress is likely to slow (and potentially substantially) activity in the quarters ahead. On net, given the Federal Reserve’s risk management approach to monetary policy strategy, growing downside risks still argues for caution, and we expect the Fed to keep policy rates steady at their next meeting in June.

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