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MS: Payrolls Reaffirmed View Of First Cut In June

  • Morgan Stanley wrote after Friday's payrolls report that on top of the strong employment details, “earnings also showed a reacceleration, driven by services employment."
  • "Labor force participation was largely unchanged, but prime-age made a notable improvement. In short, a strong labor market that is showing little signs of easing.”
  • “The data today reaffirms our view that the Fed will be on hold until June, when cuts are expected to begin. As Powell reiterated at the press conference earlier this week, the FOMC does not yet have enough confidence that inflation is moving sustainably toward 2% and by taking March off the table (unless there is significant weakness in the labor market and inflation), the bar is now higher to cut rates sooner than later.”
  • “The jobs report is further evidence the labor market remains tight and so the focus remains on inflation.” On that front, they see 3mth, 6mth and 12mth inflation rates all “well above 2% in the first quarter” with upward pressure from core services.

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