Baker Market Update – wk210604

Happy Friday to everyone! As our friend Lester rode off into the sunset last Friday (I assume on a horse named Bullet), I will be with you for this week’s economic review. Let’s first discuss the movement of Dogecoin and its potential effect on the Fed’s outlook for interest rates…kidding! All eyes were on the monthly jobs data released this morning. 559K jobs were added in the month of May, while expectations were for 675K. Today’s print was lower than expected, but not as big of a miss as we saw last month. Many anticipate it will take several months for the labor market to continue to work itself out and we shouldn’t expect to see one to two million jobs added every month, it will be a gradual process. The unemployment rate fell from 6.1% to 5.8%, slightly lower than expectation for a 5.9% rate.

The labor-force participation rate, or the share of people working or seeking work, down 0.1% from 61.7% to 61.6%. This seems to indicate that people are holding back and not reentering the workforce despite the economy re-opening. Other notable data in this morning’s jobs report included the 0.5% month-over-month increase in average hourly earnings, well above the estimate of a 0.2% increase. The rising demand for labor associated with the recovery from the pandemic seems to be putting upward pressure on wages.

Yesterday, the weekly initial jobless claims fell to 385,000, which was the first time below 400,000 since March 2020. The claims numbers are expected to continue their decline as more workers return to their jobs and as states curtail Federal unemployment benefits before, they are set to expire in September of this year.

Earlier this week, the May ISM Manufacturing registered 61.2%, an increase of 0.5% form the April reading of 60.7%. This figure indicates expansion in the overall economy for the twelfth month in a row after contraction in April 2020. The manufacturing sector is having its challenges with meeting the increasing levels of demand. Material shortages and rising commodity prices continue to affect manufacturers’ ability to keep up with the increased level of demand.

The 10-year treasury yield remained relatively flat this morning and currently sits at 1.60% with the long bond at 2.30%. Stocks are up early, with the Dow Jones Industrial Average up 124 points at opening.

Until we meet again next Friday…be careful out there!