Hiring, firing, and imprecise data

Daily update

The US May employment report is due, with the regular reminders that this data has become increasingly unreliable in recent years, and average earnings are not wages. This month’s data will correct errors that crept into last month’s data. Signs of weakness in restaurant and leisure travel sectors mean fewer lower paid workers may be employed, raising average earnings without affecting wages. But, the Federal Reserve’s “data dependency” means the labor market is seen as a trigger for policy action.
Expectations are for fewer jobs to have been created (and the most common forecast is for a payrolls figure below consensus). Firms may have slowed hiring as trade policy uncertainty has increased, but there is unlikely to be an increase in firing. That does mean that rate cuts would have a limited impact right now (although if consumer demand weakens, rate cuts become more important).
The ECB cut interest rates as expected yesterday. ECB President Lagarde’s comments at the press conference reduced market expectations of further cuts, but a July reduction is still plausible. Lagarde speaks again today.
Somewhat against the spirit of Pride Month, there has been an acrimonious separation between US President Trump and Trump mega-donor Musk. Media attention is out of proportion to the economic consequences.