top of page

Mixed Economic Data

Economic Observer: Up-to-date information on the latest financial news

Overview: The major labor market data released over the past week exceeded expectations. However, this was more than offset by the latest inflation report, which came in below the expected levels. As a result, mortgage rates ended the week a little lower.


The Consumer Price Index (CPI) is one of the most widely followed inflation indicators. To reduce short-term volatility and get a better sense of the underlying inflation trend, investors typically look at core CPI, which excludes the food and energy components. In May, core CPI was 3.4% higher than a year ago, below the consensus forecast and the lowest annual rate of increase since April 2021. The annual rate has fallen sharply from a peak of 6.6% in September 2022, but it still has a lot farther to go to reach the Federal Reserve’s stated target level of 2%. While shelter (housing) costs remain elevated, there was mostly positive news in the other components of the index. Notably, airline fares and motor vehicle insurance posted monthly declines.


Unlike the inflation data, the major labor market news released over the past week was stronger than expected. The economy added 272,000 jobs in May, well above the consensus forecast of 190,000. The sectors with the largest gains included healthcare, leisure/hospitality, and government. The unemployment rate unexpectedly rose from 3.9% to 4%, the highest level since January 2022. While the headline payrolls figure for job gains is measured by information gathered from large corporations, the unemployment rate is calculated based on a separate survey of households. As a result, it’s common to see discrepancies between the two in a given month. Average hourly earnings were 4.1% higher than a year ago, above the consensus forecast, up from an annual rate of 4% last month. Fed officials keep a close eye on wage growth because it can lead to future inflationary pressures.


As expected, the Fed again made no change in the federal funds rate, leaving it at 5.25%-5.50%. The statement released after the meeting continued to say that officials want to gain “greater confidence” that inflation is on a sustainable downward path before they lower the federal funds rate. Investors were focused on the “dot plot” forecasts from officials. According to the latest projections, officials expect that there will be just one 25 basis-point reduction in the federal funds rate this year, down from forecasts for three rate cuts in the prior set of dot plots in March. Officials also raised their estimates for the expected long-run level for the federal funds rate to 2.8% from 2.6%. Investors now are split about whether the first rate cut will take place at the September meeting.


Core PCE (annual % change)


Week Ahead

June 14

Import and Export Price Indexes

June 18

Retail Sales report


bottom of page