June 03, 2022 16:41 GMT
RBC see a tightening in the labour market that can’t easily be addressed in the near-term, they expect the Fed to keep moving faster to get back to neutral, including another 50bp hike on Jun 15.
- The unemployment rate at 3.6% was unchanged from April and around pre-pandemic lows whilst the labour force participation rate has been much slower to come back at 62.3% in May relative to a percent higher in February 2020.
- Aging demographics and shifting job preferences during the pandemic have both made post-pandemic hiring a lot more difficult, a tightening in the labour market that can’t be easily addressed in the near-term.
- Labour shortages are particularly acute for high-contact client facing industries, with leisure & hospitality still down 1.3mln from pre-pandemic, and wage growth is set to accelerate further in the near-term.