The surprisingly good May employment report.....>

FED: The surprisingly good May employment report complicates things a little for

the FOMC meeting next week. The April statement: "The virus and the measures

taken to protect public health are inducing sharp declines in economic activity

and a surge in job losses." That may have to be nuanced.

- The degree to which the Fed downplays (plays up?) the May report will be

scrutinized - perhaps Powell et all will focus more on non-U-3 rate gauges,

including U-6 and the participation rate for a broader sense of labor market

tightness. Perhaps echoes of former Fed Chair Yellen's Jobs Dashboard, which

devised as Yellen saw U-3 overstating the labor market health.

- Of course, such a quick drop in the Unemp rate is hardly going to change the

overall outlook. Powell said in the April presser: "Unemployment is going to go

up to a high number in the second quarter. Uncertain what the number will be...

I don't think it will get anywhere near the historically low levels that we had

as recently as February [3.5%]...it will take time for that to happen for to us

get back to anything that resembles maximum employment." That remains true,

though expect some questions on this for Powell.