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ING: Payrolls Keep Feds On For 50bp Hikes In Jun & Jul

  • May saw the seventh month in the last eight where payrolls beat consensus (390k vs 318k), with solid gains throughout aside from a surprise 61k drop in retail. It’s especially encouraging given a slowdown in hiring had been hinted at in other reports.
  • This report will likely please the Fed in that the job creation story is pretty good, but inflationary pressures in the labour market may well be starting to top-out. Wage growth was a touch softer than forecast at 0.3% M/M, suggesting the gains or 0.5 or 0.6% M/M through 2H21 are over.
  • ING see slower payrolls growth ahead as have most of the 22mn jobs lost in Mar-Apr 2020 have been filled and corporates are likely more cautious with growing concern about the economic outlook.
  • However, the tight jobs market with worker shortages and rising pay is both a constraint on growth and will keep inflation higher for longer.

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