Wall Street Breakfast: The Fine Print

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The fine print

The Fed still wants more hard data to decide on monetary policy, and it will get more of that today. The non-farm payrolls report for May will be published at 8:30 AM ET, following other data this week that showed job openings softening in April and the ADP’s take on private employment signaling a slower-growth scenario. Elsewhere, Challenger’s Job Cuts Report revealed that year-to-date announced job cuts are at the third-highest level since May 2009 and that hiring rates have weakened.

By the numbers: Economists, on average, expect the U.S. economy to have added 182K jobs in May, up from the Bureau of Labor Statistics’ initial estimate of 175K jobs added in April. Watch for any revisions in the April number, and with inflation being the Federal Reserve’s main focus, data on average hourly earnings will also be important. Meanwhile, the unemployment rate is expected to stay unchanged at 3.9%, which remains near record lows.

The U.S. labor market is strong and remains resilient, but is easing, said Nick Bunker, director of North American Economic Research at Indeed. “Demand for workers continues to moderate, even if it’s still elevated,” he told Seeking Alpha in an interview. “So it’s a labor market that’s still quite strong, but increasingly has come into better balance between demand for workers and the supply of workers.”

SA commentary: Weighing in on the situation, analyst Logan Kane sees the labor market weakening significantly. “While unemployment claims show little cause for concern, job openings are rapidly falling, indicating a continued, substantial slowdown in hiring,” he declared. Other softening signs include the type of hiring over the past year, which has largely been restricted to specific sectors of the economy, like leisure and hospitality, healthcare, and the public sector. (79 comments)

Divergence

The European Central Bank cut its policy rates by 25 basis points, as expected, on Thursday, its first cut in almost five years amid signs of weakening price pressures. It’s the third major central bank to embark on a new easing cycle, following the Swiss National Bank’s move in March and the Bank of Canada’s cut on Wednesday. Will the Federal Reserve fall behind the curve? Some U.S. lawmakers are speaking out, like Sen. Elizabeth Warren (D-MA), who urged the central bank to follow in the ECB’s footsteps. “Jerome Powell needs to get with the program,” she wrote on X. (10 comments)

Buckle up

GameStop (GME) has seemingly pulled out the rug from under Keith Gill, known online as Roaring Kitty, just before the influential trader was scheduled to broadcast his first YouTube livestream in three years. Gill helped propel the stock this week with a series of reported trades in the hundreds of millions, with shares more than doubling in value and trading at $62/share for the first time since the meme craze of 2021. GameStop also wanted to cash in on its popularity, with an early release of its earnings and a plan to sell 75M new shares. At the time of writing, GME is off 10% to $42/share. (39 comments)

Pay over time

“Buy now, pay later” options continue to expand as demand continues to rise for such offerings in an age of higher interest rates and inflation. Affirm Holdings (AFRM) has just launched Pay in 2 and Pay in 30 in a bid to draw more customers who get paid semi-monthly or monthly. “Adding options… allows us to better meet consumers’ individual preferences, enabling them to pay for purchases large or small that work best for their budgets,” said Vishal Kapoor, head of product at Affirm. “I Like BNPL, Just Not This Stock,” writes SA Investing Group Leader Michael Wiggins De Oliveira in a recent article on the industry.