Why labor supply is ‘under pressure’

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Why labor supply is ‘under pressure’

00:00 Brian Sozzi

A lot of fireworks here out of the gate this morning. Downward revisions plus you got the prints that largely came in just a slight hair higher than expectations on the headline print. Unemployment rate essentially in line with expectations. Greg, what’s your read in here?

00:16 Greg Valliere

Well, I think we’re seeing a softening in the labor market. I think that’s undeniable, but it’s not a retrenchment in the labor market, and that’s what was feared. It’s still likely something that may happen over the coming months because we are seeing business leaders, business managers being very cautious about the

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and noticing that this increase in cost pressures from the tariffs will require some form of reaction, whether it’s selling, raising selling prices across the board, managing inventory, or unfortunately, having to reduce head count to reduce labor costs. There will be some further cuts down the road. I think we have to focus also on the fact that there were some significant downward revisions. That puts the labor market on a lower trajectory when it comes to job growth, and even though the unemployment rate did not rise, we saw a pullback in labor force participation. That tells me that labor supply is under pressure from reduced immigration. That’s going to be another factor that we have to pay close attention to.

01:24 Brian Sozzi

So it sounds like you’d characterize this report as not bad, but you wouldn’t call it good.

01:30 Greg Valliere

It’s a moderate report. Moderate to modest if we were to use the Fed’s Beige Book terminology. I don’t think it changes how the Fed is going to perceive the

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when it comes to the robustness of the labor market.

01:46 Brian Sozzi

So then Bridge, bringing you into the conversation, rate cut expectations falling below 50 basis points already in the bond market right now. What do you think about rate cut expectations after this print?

01:56 Rick Rieder

I mean, I think, I think the bond market is, you know, usually doesn’t get it right, but I think it got it right in this case. You know, the market’s still pricing in about two cuts by the end of the year. I think where I would probably disagree a little bit is that I think those are going to be much more backloaded. And I think after the ADP print a few days ago, I was getting questions or, you know, could June be live again if we do get a very low print? And I think at this point, this number is good enough that it takes away June. I think the Fed is going to want to see more data, what you know, have we seen the progress on the inflation side over the last few months has been quite good. Does that continue for the next month? Maybe July is possible, but I, I think with this, the labor market is not cracking yet even though it’s decelerating. And I think you’d need to see an unemployment rate really above four and a half percent before the Fed starts engaging more with the labor part of their mandate compared to the inflation part of their mandate.

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#labor #supply #pressure

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