Uncertain times

Daily update

The Federal Reserve Beige Book’s summary of economic anecdote mentioned “uncertain” and “uncertainty” no fewer than 50 times this month (before tariffs were announced). That is below the uncertainty peak that followed last year’s tariffs, but well above the 14 mentions in May 2024. Uncertainty has a paralyzing effect on business decisions—and the risk is that uncertainty endures.
Uncertainty has frozen US labor market activity. There are a series of rather unsatisfactory labor market data points today. Initial claims are fine, but do not capture the “no hire” aspect of the labor market properly. Unit labor costs and productivity depend on the accuracy of GDP data (which is not accurate), and the Challenger survey of layoffs reflects a tiny subset of actual layoffs in the economy.
An announced ceasefire between Lebanon and Israel has not moved markets much—this ceasefire was necessary because the last announced ceasefire failed. There is still an optimism bias about the war, but there is no investor gullibility bias when it comes to statements from the US administration.
ECB President Lagarde speaks, but the central bank seems grimly determined to march toward its impending policy error. Swedish May consumer price inflation offers little information for global trends, coming in slightly higher.