Listen: How will the Fed respond to the May jobs report?
"Maze. Jobs report is due out this week and fed officials will be watching closely amid low inflation and political pressure to cut rates to discuss. This is Michael Mckee. Bloomberg international economics and policy, correspondent jobs have been looking too bad Montel now jobs have been part of a really healthy economy, so far. Two hundred sixty three thousand jobs created last month. Now, the forecast is for a significant decline to one hundred ninety thousand one hundred ninety thousand would have been considered a great report a few months ago. So at this point, it's still looks pretty good and the unemployment rate expected to stay at three point six percent. What about wage growth, though? Well wage growth was disappointing last month. If you consider a tenth of a percent, lower than forecast, disappointing, and we're expecting to make that up in the month of may. When we get the the report, but the year-over-year numbers. Is not going to change much three point. Two percent at still considered within the range of what the fed would like to see an expects to see when you have this low unemployment. It's just that it's not exceleron reading any faster. And that's kind of the confusion at the pet is why not we've been seeing more and more concern about the tariff wars, particularly with China. Is that going to affect things will show up in the judge of what we've already started to see it? We've started to see yield jobs go away. The steel industry has expanded in the United States, but largely through the use of automation. So while there was a ramp up in jobs in the beginning, it hasn't continued. And so we'll watch to see if that's the case we've seen jobs in appliance manufacturing drop the washing machine care that we saw last year this nonfarm payroll. So we won't get a real read on what's happened down on the farm because of the agriculture tears, but one can assume from some of the numbers we've seen arm bankrupt. That there may be fewer farmers out there as well. Yeah, we've heard lots of reports of distressing culture business. What about the fed? What are they going to be watching for all of these numbers in the jobs numbers? They keep an eye on the average hourly earnings. Because their main goal at this point is to keep track of inflation, and the theory is and low unemployment rate will raise wages and that will eventually feed through to higher prices companies make up for the loss margin when they have to pay workers more, but so far they've been able to absorb the pay increases and there hasn't been an uptick in inflation. Question is will there ever, be or has inflation dynamics change? Or is it just a late? And at some point we'll hit. That's what they're watching for. So what is it gonna take to get asking this question for years to get inflation burning? You know, before we get the jobs report, there's a big thank coverage in Chicago. Coming. Will be asking that question. What about the Fed's policies needs to change? Because the two percent inflation target hasn't been hit and over the last twenty years. A lot of people don't realize this, the inflation index that the fed falls has ever GE one point eight percent. And since they adopted the target in two thousand twelve it's average one point four percent. So is that still a realistic goal or can we live with lower inflation, that's going to be the question out there, because nobody really knows how to generate is that an an I think I can I think I can number or are we ever going to get to two percent? Well, it's one of those numbers that works in theory is we'll see higher inflation, and the fed will react once it gets above two percent for a little while. But the idea is that you create inflation expectations in the market, and that helps drive up inflation, and it hasn't happened and nobody quite knows why I asked you about terrorist earlier. How concerned is the fed about that. Well, they're keeping an eye on the Fed's last meeting was in March, and Donald Trump ratcheted up the trade war at the beginning of may. And so they haven't had a real chance to consider what will happen. There's always been a feeling out there in the market, certainly that a G. They this is just posturing. We will get an agreement in all. We'll be right with the world. And we've seen in the last week that maybe the markets are beginning to price in the possibility that all will not be right with the world. Trouble for the fed is, it's hard to measure what the impact is. Because you, you can guess it, how many jobs might be lost or how much GDP might be lost. But what's the impact of falling markets on spending, and on confidence? If the markets get scared that the China trade war is going to be damaging, so it's, it's, it's something they're keeping a close eye on. But they don't really know yet. The irony here is because of the tariffs, the president might get what he wants in. That is a rate cut. Well, it would take some. Some time for that to happen. The fed is content to sit on the sidelines. They're not going to be bullied by the markets. They sort of went on hold after the December ructions in the markets. But their view is the data would have told us to do that anyway. And so at this point, they're going to stay on hold as long as they can. Unless we see a significant dive in inflation that sustained over a couple of months they're going to stay on hold a nut cut rates because there's still the possibility that trade war ends. And there is the possibility that we see inflation at least maintained if not rise. So they don't see an urgency"