Non-farm payrolls were released on Friday and showed a gain of 372,000 for the month of June.
This was well above the consensus expectations and caused some volatility in the markets as they remain unsure whether to treat good news as good news or the good news as bad news because the Fed will remain hawkish.
Maybe the labor market isn’t as strong because the second survey, the Household Survey, was negative and has shown a net job loss over the last three months. This survey often goes under the radar and tends to lead but is much more volatile. Jobless claims come out weekly and are generally a better lead indicator on a recession.
They remain modest in absolute terms but have increased 30-40% from the bottom, the necessary threshold for a recession. It is the classic debate in financial markets about rate-of-change or absolute levels.
Any debate about Fed hawkishness was put to rest when the consumer price index (CPI) report came in way hotter than expected. The monthly increase was 1.3%, which is the largest of this cycle. This took the year-over-year number to 9.1%, also a cycle high.
Unfortunately, the math makes it difficult for this to be the peak over the next couple of months and will likely keep volatility elevated.