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Key Takeaways from the May Jobs Report
1:56 pm ET, June 7, 2024
All eyes now turn to next week’s CPI inflation report
A worker plasters the roof of a new housing development on February 22, 2024, in southwest Portland, Oregon. Jenny Kane/AP Professional growth and salary growth They are good for Americans and their livelihoods, but too much – especially from the latter – may be cause for some consternation among central bankers who want to see slower inflation.
Stronger-than-expected wage gains this month increased average hourly earnings to 4.1% last year, reversing a cooling trend that had been ongoing for months.
“The Fed does not directly target wages; but where the collected wages are in [service sector] areas where we saw more inflation,” Diane Swonk, chief economist at KPMG, told CNN.
This occurs in the service sector, from personal care services, home cleaning and maintenance, and vehicle maintenance, she said.
“And that’s a difficult thing for the Fed to do, because for some of the increases that we’re seeing in the services sector, we need to see offsets in the prices of goods in order to reduce inflation,” she said. “But it takes a lot of this on a consistent basis to deal with the stickier inflation we are seeing in the services sector; and, unfortunately, wages matter more in specific areas where inflation has become stickier.”
If the acceleration in wage gains keeps things difficult, the proof will be in the pudding next week: The Consumer Price Index for May will provide crucial insight into the path of inflation.
Released on Wednesday, the same day the Fed is expected to announce its latest monetary policy decision, economists’ early projections are that consumer prices have slowed monthly and that a key indicator of underlying inflation will also moderate.