Labor Market Shows Signs of Resilience Ahead of Friday’s Nonfarm Payrolls

Rates rise following strong labor data. The policy-sensitive 2-year yield rose ~4 bps in the immediate aftermath of today’s JOLTS Job Openings print, which showed that US job openings unexpectedly rose to 7.39 million in April. Coupled with strong hiring and low unemployment year-to-date, the data further signaled that the Fed can be patient with rate cuts. Yields closed 1-2 bps higher across the curve, pushing the 2-year yield to 3.95% and the 10-year yield to 4.45%. The labor print also contributed to an equity rally, with the S&P 500 and NASDAQ up 0.58% and 0.81%, respectively.

Today’s Fed speakers reiterate focus on inflation. Fed President Bostic is the latest Fed official to argue that the Fed should remain patient before cutting rates. He said today that he wants to see “a lot” more progress before rate cuts and that he is “not declaring victory on inflation yet.” Bostic also published his latest economic overview today, titled “Pervasive Uncertainty Calls for a Patient Policy Stance.” Bostic highlighted that inflation remains above the Fed’s 2% target and that Atlanta Fed research suggests the possibility of tariff-related inflation over the coming weeks. Looking ahead, Bostic potentially sees one 25 bp cut during 2025, but noted that if inflation and higher inflation expectations become entrenched, it “could warrant a policy response.” Fed Governor Lisa Cook also appeared more focused on inflation, saying at a separate event that as she balances the Fed’s dual mandate, she “will take into account the fact that price stability is essential for achieving long periods of strong labor market conditions.” 

OECD slashes global economic growth forecasts. The OECD estimates that the US economy will grow by just 1.6% in 2025 and 1.5% in 2026, assuming that tariffs as of mid-May are sustained. Meanwhile, the organization forecasts that global economic growth will decline to 2.9% this year versus 3.3% in 2024. The OECD pinned the projected slowdown on “substantial increases in trade barriers, tighter financial conditions, weakened business and consumer confidence.” They continued by stating that “agreements to ease trade tensions and lower tariffs and other trade barriers will be instrumental to revive growth and investment and avoid rising prices… this is by far the most important policy priority.”