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📝 April Jobs Report Reinforces Our Fed 50bps Hike Call In June: Wells Fargo Securities

The employment side of the FOMC's dual mandate is clearly not a barrier to monetary policy tightening at present, both wage and payroll growth remain well-above their long-run sustainable growth rates. In the near term, the FOMC clearly has more policy tightening to do, and today's solid job report reinforces our belief that the FOMC will execute another 50 bps rate hike at its next meeting on June 14-15. Average hourly earnings rose 0.3% in April, a touch below the Bloomberg consensus. However, upward revisions to March's data left year-over-year wage growth at 5.5%, in line with consensus expectations. As workers stream back into the labor market and the Fed steps on demand, we expect wage growth to moderate ahead. While the first quarter's rise in the Employment Cost Index was a scorcher, there are other signs that wage hikes may start ease, indicated by small business compensation plans and reports from the Fed's latest Beige Book. That said, wages are unlikely to slow to a pace consistent with 2% inflation anytime soon and point to elevated labor costs keeping the Fed on its hawkish path. - Wells Fargo Securities



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