Unexpected jump in jobs, and hotter than expected wages means Federal Reserve has no option.
“Does this Jobs Report indicate that rate hikes could be on the table? Our survey of small business owners indicates they’re already expecting this move.”
-- RedBalloon CEO Andrew Crapuchettes
The Bureau of Labor Statistics released the Employment Situation Report this morning and showed that the US economy added 272,000 jobs in the month of May. This number, which came in well above expectations of 190,000, was largely fueled by a jump in part-time employment.
Meanwhile, overall unemployment took an unexpected step upward to 4%, the highest since 2022, and wages jumped 0.4% in one month (0.3% expected), and 4.1% for the year (3.9% expected). This strong Jobs Report strengthens doubts as to whether the Fed will cut interest rates.
According to the May Freedom Economy Index, nearly 4 in 10 small business owners now believe the Fed will raise rates in 2024, signaling a sharp reversal of sentiment from just 3 months ago.
In addition, over 6 in 10 small business owners now believe the US economy is headed into stagflation - the situation where prices continue to rise while the economy fails to grow or even slips into recession.
“Rising wages and falling labor force participation indicates stagflation in the job market,” Andrew Crapuchettes RedBalloon CEO said. “That’s why over 6 in 10 small business owners now believe the US is headed toward stagflation.”