📝 Jobs Report Lands In Sweet Spot For The Fed: Wells Fargo

May's downshift in hiring to its slowest pace in more than a year still leaves payrolls rising at a robust pace. Today's report lands in a sweet spot for the Fed. While the labor market remains clearly tight and is adding to inflationary pressures. Through the noise, wage growth has shown some signs of slowing relative to the pace seen in the second half of last year, but at a 4.5% annualized pace, earnings are still growing at a rate inconsistent with the Fed's 2% inflation target. Any relief is unlikely to bring wage inflation back toward a rate in line with the Fed's 2% inflation target anytime soon, given the utterly tight state of the market. Business margins are squeezed and workers see wage growth that struggles to keep up with inflation. To the latter point, we estimate real average hourly earnings declined 0.5% in May.

- Wells Fargo Economics