Economic Data Tracker – 
Job growth surprises to the upside 

Trend watch

Travel remains robust ahead of Memorial Day, which is the unofficial start of summer travel. Weekly air passenger counts jumped to 18.65 million, averaging more than 2.66 million per day, which is the highest level since at least 2018.

To put it in perspective, that’s higher than mid-summer figures for 2019. Again, that’s well ahead of the typical summer pattern, which ramps higher starting around Memorial Day and peaks in early July, then plateaus for four weeks.

Similarly, hotel occupancy jumped to 67.4% this past week, which is a 30-week high. Most of the activity-based indicators (slides 5 and 6) improved on a week-to-week basis. 

What’s new this week

• May job growth surprised to the upside (slide 7).
• Most labor metrics cooler than 2023, but not weak (slide 8).
• Wages up in May, remain well-above pre-pandemic pace (slide 9).
• Purchasing managers index (PMI): Mixed view continues (slide 10).
• Job openings continued to decline in April but hiring up, while quit rate back at prior trend (slide 11).
• Retail sales improving compared to 2023, but some consumers appear to be trading down for bargains
  (slide 12).
• NY Fed’s Weekly Economic Index hit an 83-week high (since late October 2022) (slide 13). 

Our take

Additionally, most of the incoming economic data has firmed lately. The exceptions – housing, manufacturing, and commercial real estate – are well known. For instance, the ISM Manufacturing PMI Index (slide 10, top left) showed that manufacturing activity contracted in May. Yet another manufacturing gauge – S&P Global's U.S. Manufacturing PMI Index – indicated that activity expanded in May. To be fair, there are differences between the two, including varying subsector weightings and sample sizes, as well as the degree to which those subsectors are U.S.-centric (e.g., how dependent on exports, etc.). 

Based solely on a continued solid labor market, the U.S. economy doesn’t appear to need interest rate cuts to maintain growth in the near term. That means the Fed will probably hold rates steady for a while longer, perhaps disappointing some investors. Of course, monetary policy decisions are based on more than simply the jobs report.

We’re solidly in the “a stronger economy is good” camp. Still, given where key components are trending, including the ongoing housing malaise, we believe that progress on inflation should allow for at least one rate cut before the end of this year. 

Bottom line

The U.S. economy remains resilient, sidestepping a recession. Most economic data continues to steadily improve, though crosscurrents have reappeared. Additionally, the cumulative impact of higher rates is weighing on economic growth. We maintain our view that the Fed will reduce rates at least once this year.