We remain committed to bringing inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions.

– Fed Chair Jerome Powell, 3 May 2023

Later today we get the latest employment report from the BLS; it is expected to show that total nonfarm payrolls increased a further 185,000, the smallest monthly increase since December 2020, though still fast enough to be consistent with a flat unemployment rate. Meanwhile, earlier this week we also saw the release of the April ADP employment report (which directionally is consistent with the nonfarm payroll report, but not so much in magnitude), which showed an exceptionally strong 296,000 jump in jobs growth, well above the expected 150,000. Looking at the headline data we are clearly not seeing much of the “required” softening of labor market conditions that Chair Powell notes will be necessary to moderate inflation.

Given the slew of data out this week on the employment situation, in this Economics Weekly we parse this week’s reports and what they are telling us about strength in the labor market and the economy more broadly.

For a copy of this report or to subscribe to the Economics Weekly or Economic Indicators reports, please contact your William Blair representative.

Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.