Aurelia Butler

“Our baseline for FOMC policy remains unchanged from last month, Macquarie said in a recent note. “We suspect rate cuts will only commence in 2025 when there is greater scope for YoY core PCE inflation to appear to be tracking back towards 2%.”Last week data showed that year-on-year core personal consumption expenditures price index, or core PCE, the Fed’s preferred gauge of inflation, remained steady a 2.8% in April from a month earlier. Slowing prices in core services, excluding houses, was one of the major highlights of the report as the measure slowed to a 0.27% pace, driven by a cooling in air transportation.But core goods prices rose 0.1% in April from March, marking the third consecutive monthly increase and suggesting that the trend of slowing goods prices has “bottomed and appears to be firming,” Macquarie said, falling it as an upside risk to the inflation outlook. In the coming months, the firming of core goods prices may “come to fruition,” Macquarie added, flagging a jump in  freight rates and a potential resurgence in used car prices after wholesale prices rose in May for the first time since September.Beyond inflation, however, Macquarie like the Fed, is keeping a close eye on the labor market as unexpected weakening could well force the Fed to pivot. “Should the labor market weaken more than is desirable (and more than we anticipate) this could prompt earlier FOMC action,” Macquarie said. Ahead of the Fed meeting next week, the monthly non-farm payrolls due will take on added importance following recent data, released Tuesday, showing job openings, a measure of demand for workers, dropped to a three-year low.   The odds of a rate cut in September jumped to 55% from 44.9% last week, according to Investing.com’s Fed Rate Monitor tool.    More

WASHINGTON (Reuters) – The U.S. job market in April cleared a key hurdle in its slow return from the COVID-19 pandemic when a wonky economic chart known as the “Beveridge Curve” finished its own journey from where it had shifted during the health crisis back to where it was in 2018 to 2019.The Beveridge Curve plots the relationship between job openings and the unemployment rate, and data released on Tuesday further validates an idea floated by Federal Reserve Governor Christopher Waller in mid-2022 that, counter to the idea that inflation could only fall with a large rise in the unemployment rate, the pandemic’s elevated level of job openings pointed to an alternate path.A drop in job openings could create the economic “slack” needed for inflation to fall without much change in actual joblessness – returning the Beveridge Curve to where it was.As of April, that appears to be what has happened.The story isn’t completely written: Inflation, which was running at 2.7% in April based on the Fed’s preferred measure, is not back to the U.S. central bank’s 2% target, and recent progress has been sluggish.But measures of what’s happening in the labor market are looking increasingly like they did before the pandemic. NOT A MARQUEE CONCEPTThe Beveridge Curve is not one of the marquee economic concepts beyond the community of labor experts, but it has had a moment during the pandemic, with a large shift at the start of the health crisis and now a round trip back. Still unresolved is whether further progress on inflation – the so-called “last mile” – will require a move along the normal part of the curve, with further declines in job openings associated with rising unemployment.JOB OPENINGS TO UNEMPLOYEDAs the economy reopened from the pandemic, firms scrambled to meet a wave of demand. Job openings spiked. The ongoing health crisis, however, put a damper on the willingness to work, crimping labor supply. By the spring of 2022 the Bureau of Labor Statistics estimated there were more than two open jobs for each unemployed person. The number before the pandemic never went much beyond 1.24.In April it had returned to 1.24, a steady realignment between the demand for workers and those available to fill jobs.QUITS RATEFrom “ghosted” employers to a wave of retirements, the pandemic was a moment of peak leverage for people who wanted to negotiate new terms, a new job or better pay, or simply not show up. The quits rate told the tale, with nearly 3% of the workforce leaving jobs every month from mid-2021 to mid-2022 – a historic reshuffling of the labor market.Much to the relief of human resource officers as well as Fed policymakers, it has been at 2.2% for six straight months, below where it was before the pandemic.UNEMPLOYMENT RATEAn unemployment rate of around 4% is what the U.S. can support without rising inflation, according to Fed economic projections. But in mid-2018 the jobless rate dipped below that level and, as the spike in unemployment caused by the pandemic receded, resumed the same trend in early 2022. Whether that represents a “new” normal of high comparative demand for labor remains to be seen; job markets may just be functioning better through, for example, technology that improves matching and allows for faster hiring.Regardless, it’s another way today’s job market looks like it did before the coronavirus outbreak.MONTHLY PAYROLL GROWTHThe release on Friday of the U.S. government’s monthly jobs report will provide the latest look at a key aspect of labor normalization when employment and job growth data for May are released.Even if the U.S. population is growing slowly, it is still growing, so more jobs are needed each month to keep pace. Exactly how many more is a matter of debate. There are estimates of fewer than 100,000, though lately a jump in immigration has led to speculation that the number could be double that figure. The job growth seen during the post-pandemic reopening of the economy, however, is widely considered unsustainable. It has been slowing, with a pace gradually coming into line with the average of 183,000 per month seen in the decade before the health crisis. More

MEXICO CITY (Reuters) – Mexican finance minister Rogelio Ramirez de la O sought to reassure investors and markets, saying on Tuesday he would stay in his current role with the incoming government and work to reduce public debt and maintaining financial discipline.Ramirez de la O briefly spoke to analysts on a closed call, an audio of which was shared with Reuters, after a Sunday landslide election victory for the ruling MORENA party and its coalition spooked markets, tanking local stocks and the Mexican peso. In his remarks, Ramirez de la O said he would be continuing in his role as finance minister for an “indefinite period” as part of president-elect Claudia Sheinbaum’s new government, which takes office in October. He said he will seek to “refresh” communication with credit rating agencies and investors about Mexico’s priorities, including economic stability and fiscal prudence.Ramirez de la O said in a short statement published by the finance ministry following the meeting that the new government would seek “the reduction of debt generated each year by 2025 to levels compatible with a sustainable debt/GDP range in the medium term of around 3% of GDP.”The minister said the new government plans to abide by the “central bank’s autonomy, adherence to the rule of law” and facilitate “national and foreign private investment.” Markets have been volatile since the Sunday election due to the possibility the ruling coalition will secure a two-thirds super-majority, or very close, in both houses of Congress, allowing them to pass constitutional reforms unopposed.Mexico’s peso currency clawed back on Tuesday morning some of its losses a day earlier, dipping 0.45% against the dollar after hours earlier losing as much as 2.9%. On Monday, Mexican stocks fell over 6% and the peso closed at its weakest since November, ending the session down 3.8% at 17.671 per dollar.The minister also said the government planned to work closely with indebted state oil firm Pemex to optimize its use of its resources. More

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