The latest on markets, the jobs report and the debt ceiling

Policymakers at the Federal Reserve signaled last month that they were considering a pause in their 14-month long regimen of hiking interest rates to cool the economy and bring down inflation.

But the US economy is like an engine that won’t quit — it just keeps on pumping out jobs.

Fed Governor Philip Jefferson — who is set to be Fed Chair Jerome Powell's number two — said Wednesday that a pause at the central bank's June 13-14 meeting wouldn’t mean that hikes are finished but would instead give central bank officials more time to assess the state of the economy.

“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” said Jefferson in a speech. “Indeed, skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming.”

Bankrate senior economic analyst Mark Hamrick said: “While the Fed is still talking like it is on the inflation righting warpath, the resilience and strength of the job market have been remarkable.”

Markets are currently placing the probability of a quarter-point rate hike in June only at about 30%, according to CME FedWatch. That’s up from around 0% in mid-May. Prior to Jefferson’s speech, markets were pricing in a 70% chance.

Uncertainty seems to be the name of the game right now.

“Markets may wish for a Fed pivot, but we believe that hope is not a strategy,” said David Kotok, chairman and chief investment officer at Cumberland Advisors.

“Of course,” he added, “that could change at any time.”

Fewer employers looking for workers means 270 employees at job search site ZipRecruiter will soon be out of a job.

The company is cutting 20% of its staff by the end of this month, the company disclosed in a filing late Wednesday.

“This action was taken in response to current market conditions and after reducing other discretionary expenses, with a view toward driving long-term efficiency,” according to the filing.

The company had previously said it is experiencing a “typical softness in jobs posting” in January, but sounded other alarms about a slowing in the labor market. Its first quarter revenue fell 19% from a year earlier and it forecast that its revenue in the current quarter would be down nearly 30% from the second quarter of 2022.

The job search site still projects adjusted earnings that are roughly the same for this year as last year, although it said to do so it would “respond to our environment quickly” by “increasing our focus on profitability during times of decreased demand from employers.”

Read more here.

Consumer spending and the labor market — two areas of strength in the economy — continue to feed on themselves. 

Last week, a Commerce Department report showed that not only did the Fed's preferred inflation gauge heat up in April but so did consumer spending.

Economists largely attributed consumers' resilience to the healthy labor market as well as ample dry powder stockpiled from home refinances and from the temporary pause in student loan payments.

In turn, that's kept businesses busy.

"With demand for goods and services holding up, employers who have been cautious and have been very nervous about over-hiring are — when push comes to shove — having to keep hiring just to keep pace with business activity," Julia Pollak, chief economist for online employment marketplace ZipRecruiter, told CNN.

"They're very worried about a recession later this year, but they need to keep hiring today to provide the pizzas that people are demanding and to prevent flights being canceled. Companies have also learned the hard way how costly staffing shortages can be."

Labor turnover data released Wednesday showed that the US employment market remained tight in April. 

Job openings bounced up to 10.1 million positions, bucking economists' predictions for a fourth-consecutive monthly decline, according to the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey report. The jump brought the ratio of vacancies to unemployed to almost 1.8, which is well above a range of 1.0 to 1.2 that is considered consistent with a balanced labor market, according to Michael Feroli, JPMorgan chief US economist.

Although the April JOLTS data showed that fewer people were voluntarily quitting their jobs, the amount of layoffs and discharges dropped during the month, suggesting that employers are continuing to hoard workers, noted economist Matthew Martin of Oxford Economics. 

While monthly job gains haven't tailed off as much as anticipated to this point, there is a notable slowdown that's occurred from the blockbuster job gains of the past three years. 

"We were in such an unusual place during the pandemic with some of those indicators at completely extraordinary heights that they have experienced extraordinary declines," Julia Pollak, chief economist for online employment marketplace ZipRecruiter, told CNN.

"But those declines were just a return to normal, not a contraction, and it's not a recession." 

Areas of the US economy have started to crack under the weight of persistently high inflation and a string of 10 consecutive rate hikes from the Federal Reserve. 

But despite all that, the labor market has kept humming right along. And that's largely expected to be the case, again, in Friday's monthly jobs report from the Bureau of Labor Statistics. 

"In the last few months, the job market has continued to defy gravity, adding a steady clip of jobs and holding unemployment at historically low levels despite a backdrop of rising interest rates, banking turmoil, tech layoffs and debt ceiling negotiations," Daniel Zhao, lead economist at employment review and search site Glassdoor, wrote in a note this week.

"After a healthy April jobs report, May is likely to repeat with an equally strong performance," he said.