11:37 a.m. ET, June 7, 2024
The “good news” of job gains come with some “bad” baggage
Attendees at a City Career Fair hiring event in Sacramento, California, on June 5, 2024.
David Paul Morris/Bloomberg/Getty Images
At a time when Americans and the Federal Reserve are clamoring for clear-cut data about the state of the economy, Friday’s jobs report was much more opaque than everyone had hoped.
While “it’s hard not to like a lot of jobs,” as economist Dean Baker told CNN Business in an interview, other contents of the May jobs report add to the pile of unwelcome economic news that’s included slower GDP growth, a pullback in some spending, and a rise in credit card delinquencies
“The good news is we saw the explosion in payrolls. The bad news is the rise in unemployment with an acceleration in wage gains,” Diane Swonk, chief economist with KPMG, told CNN.
The unemployment rate rose to 4% from 3.9%. It’s the first time in more than two years that the jobless rate is not below 4%.
Stronger-than-expected wage gains for the month pushed up average hourly earnings to 4.1% over the past year, reversing a monthslong trend of cooling.
“The Fed doesn’t directly target wages; but where the wages picked up are in the [service sector] areas where we’ve seen the most inflation,” Swonk said.
That’s in the service sector, everything from personal care services, dry cleaning, cleaning and home maintenance and vehicle maintenance, she said.
“And that is something that is hard for the Fed, because in order for some of the increases we’re seeing in the service sector, we need to see offset in goods prices in order to bring inflation down,” she said. “But you need a lot of that consistently to deal with stickier inflation that we’re seeing in the service sector; and, unfortunately, wages matter more in particular areas where inflation has gotten stickiest.”