Let’s face it. These numbers are disappointing. But not the end of the world… So keep that in mind when you think about the impact of the May jobs report.
When April’s numbers came out, we assured you that it wasn’t as bad as the mainstream media would have you believe. Now, the numbers are improving, but not enough to begin the tapering process like we hoped.
Tapering is simply the beginning of a reduction in the buying of assets by the Federal Reserve.
Nonfarm payroll data came in a little underwhelming this morning, with the economy adding 559,000 jobs versus expectations of 675,000.
Average unemployment fell slightly to 5.8% while underemployment came in a little lower at a still-less-than-optimal 10.2%. But the labor force participation rate went the other direction, falling back a tick to 61.6%.
Of course, along with that mixed bag comes the inevitable Fed-driven headlines… Simply because the jobs report wasn’t hot enough to warrant speculation on continued inflation and a future interest rate hike.
But frankly, all of these related ideas and stories about the impact of the May jobs report need to be contextualized with other things that we know for a fact to be true…
For instance, we know that demand continues to increase while supply — particularly the supply of labor — is completely crunched.
We also know for a fact that 24 states are about to kick extended unemployment benefits to the curb. Meanwhile, a record-high 48% of small business owners in May reported unfilled job openings, per the National Federation of Independent Business.
Let’s put those two things together… lots of people who will need jobs… lots of job openings…
In total, there are probably 3-4 million people who will get pushed back into the labor pool over the next month or so. And by definition, that means there will eventually be a big drop in jobless claims.
Let me be clear: That’s good news.
But it very well could give rise to what would likely be one last wave of inflation — a dynamic we may actually be seeing play out in oil prices as I write this.
So rest assured, the taper talk will continue… and eventually, we’re going to get it…
but like many things in markets and pandemics, it will happen slowly… and then BOOM!
All at once.
All the best,
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