The April jobs report shows that the labor market is still strong, adding 235,000 jobs last month, the highest since January. The unemployment rate fell to 3.4 percent, the lowest it has been since 1969. The low unemployment created upward pressure on wages, the average hourly wage increased 0.5% from last month and 4.4% from last year to around 33 dollars.
The strong job markets complicate the Fed's decision-making even more. On one side, the banking crises and easing inflation make the case for the rate hikes to stop, on the other side, the strong labor market suggests the possibility of further increases.
The low unemployment rate is a cause of inflation because the short supply of labor increases employees' bargaining power and results in increasing wages, these wages in turn increase demand in the economy, causing inflation, so inflation will remain as a problem until we see the job market cool.
But there is one important point to consider, the monetary tightening (the decreasing of money supply by the Fed through rate hikes, regulation, or selling bonds) usually has a lag, so the effects are not immediately felt in the economy. Even though the job market is surprisingly resilient at this point, as the effect of higher costs of capital starts to be felt by firms, hiring will probably slow down in the next couple of months.
Most investors see a low chance of a rate hike in the next FED meeting, only 7%, due to easing inflation and the banking crises.
Some suggest that the new tightening is delayed easing, meaning that even though the Fed might not hike rates in the next meeting, they might delay the rate cuts to allow the job market to cool.
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