Payroll Confict

Peter Boockvar evaluation states that this month’s job report has an internal conflict, with employers reporting 272,000 new hires while households reported having 408,000 fewer jobs.

• The unemployment rate rose to 4.0%, the highest since November 2021 but still historically low.
• Almost all the household survey’s lost jobs came from the 20-24 age cohort. Those age 25-54 showed small gains.
• Average hourly earnings rose 0.4% for the month and are up 4.1% in the last year.
• The prime age (25-54) participation rate rose to 83.6%, the highest in 22 years.
• Job gains continue to be led by private education/healthcare, state and local government and leisure/hospitality.

Bottom Line: Just months ago, economists were confidently projecting four rate cuts this year. Fed Funds futures following today’s report indicate only one cut is likely with about 40% odds of a second one. That means fixed income investors should enjoy higher yields a little longer, while heavy borrowers (like the federal government) will keep paying more interest.

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