Stocks are lower this morning on no real news. Bonds and MBS are flat.
The economy added 172,000 jobs in May according to the BLS. This was well above Street expectations of 85,000. The unemployment rate was steady at 4.3%. The labor force participation rate was steady at 61.8%, while the employment-population ration inched up. Average weekly earnings were up 3.4%, in line with expectations. The number of people unemployed fell 66k, of which 17k exited the workforce and the remainder got jobs.
It appears that the low hire / low fire environment might be improving.
Nonfarm productivity rose 0.3% in the first quarter as output rose 1% and hours worked rose 0.7%. Unit labor costs rose 1.8%. San Francisco Fed President Mary Daly said that evidence of productivity is everywhere, but it has yet to really show up in the data.
“Productivity growth is everywhere except in the data,” said San Francisco Federal Reserve Bank President Mary Daly while speaking about the impacts of artificial intelligence.
“It’s business process change that generates sustained productivity gains, and firms are just at the early stages of interrogating, learning the technology, using the technology, and then thinking, how do I change my business so it doesn’t actually look the way it once did,” she said.
“Think of electrification. We had electricity for a long time before we got the rapid productivity growth that came from electrification,” said Daly. There will be a S curve for productivity as AI continues to develop.
Speaking of AI and productivity, announced job cuts rose 16% in May to 97,006 according to outplacement firm Challenger, Gray and Christmas. This is the highest May since 2020. “On top of the headline AI story, we’re seeing a sharp rise in cuts tied to acquisitions and mergers and a jump in bankruptcy-related losses, which tells me companies are restructuring aggressively as they reposition for an AI-driven economy,” said Andy Challenger, labor and workplace expert and chief revenue officer of Challenger, Gray & Christmas.
“The labor market is being reshaped by technology in real time. AI is now the leading reason companies give for cutting jobs and the primary industry citing it is Technology. Technology, already the year’s biggest job cutter, saw its steepest month of cuts since early 2023, even as it remains the sector with the most hiring plans this year,” said Challenger.
