I’ve been in full posthumous equine beating mode with respect to detailing the prevailing and conditional labor dynamics over the last couple months, so we’ll keep it tight.
Let’s begin by gaming out the asymmetries.
What do we know:
- Demand continues to increase, supply and labor constraints continue to intensify, the combination of which continues to flow through prices.
- Labor remains the primary conduit for increasing supply and renormalizing the prevailing imbalance(s).
- Underwhelming hiring in April amidst step function improvement in Services activity served to stoke concerns around intensifying demand-supply imbalances and prospective price spiraling.
- With NFIB Jobs Hard to fill at an ATH, ISM Mfg and ISM Services Employment sliding, Employment across the Fed Regional Survey’s backsliding, the Hires-to-Openings ratio at a record low, the share of job postings indicating “urgent” doubling in the last couple months and all manner of anecdata all pointing in the direction of tight(ening) labor supply.
- The pace of employment gains in 2H will be critical in determining the balance and extent to which conditions equilibrate via real output growth or via price growth.
That is the pretext for today’s data and most/all of it will still apply on the other side of it.