‘The U.S. labor market is undoubtedly the strongest pillar of the U.S. economy today,’ strategist says

‘The U.S. labor market is undoubtedly the strongest pillar of the U.S. economy today,’ strategist says

RSM Chief Economist Joe Brusuelas and John Hancock Investment Management Co-Chief Investment Strategist Emily Roland join Yahoo Finance Live to discuss the March jobs report, the expectations for additional Fed rate hikes, a recession, and the outlook for the U.S. labor market.

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10:29

Yahoo Finance

Fri, April 7, 2023, 11:48 PM GMT+9

Video Transcript

BRAD SMITH: Joe, I'll go to you first, just because you're sitting to my right here. You're read in on the data that just crossed on the employment situation?

JOE BRUSUELAS: The Fed's going to hike its policy rate by 25-basis points when it meets in May. I think that's the primary takeaway. Look, a 3.5% unemployment rate, pretty much status quo. A strong, albeit cooling job market. This is what you want to see, but it's necessary, but not sufficient for the Fed to actually declare, hey, a peak.

Wages, what, we were at 4.2? On a year ago basis, 0.3. I want to dig in a little deeper. I think we're going to have a three-handle in it. A three month average annualized pace. That gives you a sense, I think, of where, one, the risk of a wage price spiral is. That means it's diminished.

That's actually good. That means we will get a near-term top in that policy rate peak. But look, demand's still stout for workers. We're short workers in all kinds of service industries. So we have a tight labor market. Inflation is cooling, but not cooling fast enough.

SEANA SMITH: Emily, what do you think. Do you agree the print coming in slightly above expectations-- unemployment, 3.5%, really pointing to the fact that the labor market remains very tight?

EMILY ROLAND: Yeah, Seana, absolutely. The US labor market is undoubtedly the strongest pillar of the US economy today. And in fact, we just beat expectations in a nonfarm payrolls report for 12 months in a row. And that's a streak that dates all the way back to 2000.

So no doubt about it. And we are seeing the bond market reprice expectations, as Joe mentioned, for what the Fed's going to do in May. We were looking at about a 50/50 chance of another 25-basis point rate hike versus a hold in May. And now I'm looking at the bond market expectations and 25-basis points is now the base case.