Hiring Gains, Confidence Pains | S3 E144 | 05-08-26

The U.S. job market is showing renewed momentum, with the economy adding 115,000 jobs and posting the strongest two-month stretch of job gains since 2024. But beneath the surface, there are still signs to watch — including weaker labor force participation, rising underemployment, and consumer confidence hitting another record low.

In this episode of Markets with Megan, Megan Horneman breaks down what the latest jobs report means for the economy, the consumer, inflation, and the Federal Reserve’s next move.

For a full history of the podcast, visit: https://marketswithmegan.fm

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Transcript

Market Snapshot And Quick Setup

Megan Horneman 0:00

The job market is definitely gaining some momentum. It is Friday, May the 8th, and this is Markets with Megan. If you like this podcast, subscribe, hit the alarm bell. You can also share it with your friends, family, colleagues, neighbors, anybody who wants to look at the economic data that's released on a regular basis. What makes the headlines and what does that mean for your investments?

Monthly Jobs Report Headline Numbers

Megan Horneman 0:21

Well, this morning we received the monthly jobs report, and this is always a very important report, tends to be very have market implications. And what we saw this morning is that the U.S. economy added 115,000 jobs last month. So we now are seeing the best two months in job gains for the U.S. economy that we've seen since 2024. Some of the other details are the unemployment rate was unchanged at 4.3%. Earnings grew 3.6% on a year-over-year basis.

Participation Drops And Underemployment Rises

Megan Horneman 0:52

When we look at though, the labor force participation rate, that actually fell to the lowest we've seen since October of 21. It's fallen for the past five months, and it's been led by those that are 55 and older, so leaving the workforce. The underemployment rate, or those that are working part-time because they can't find a job for economic reasons, that rose to a year-to-date high. So that's something to keep an eye

Where The New Jobs Show Up

Megan Horneman 1:19

on. The strength that we saw came from healthcare jobs, uh, leisure and hospitality, trade, goods producing. And what's interesting is construction jobs are coming back as well. So it was the second consecutive month of gains in the construction jobs. And we have seen some mixed readings, but some good readings here and there on housing. So maybe we're getting a bit of the thaw in the housing market from a construction standpoint.

What This Means For Fed Rates

Megan Horneman 1:43

Now, this is um a very interesting report because the labor market is holding up better than some had anticipated. So, what does this do? It gives the Fed the ability to not make any changes to interest rate policy. We don't think they're going to do anything this year. We're actually leaning towards if inflation continues to be a problem because we're not getting this Middle East conflict wrapped up, then we could possibly see interest rates higher at the end of the year than having to make some adjustment towards the end of the

Confidence Hits Lows As Inflation Bites

Megan Horneman 2:11

year. Now, the other things that we saw this morning is that the University of Michigan came out with their consumer confidence report, their monthly report. And the first reading for the month of May is that confidence made another record low. So we have a good job market, consumer confidence that continues to make record lows, but yet an economy that's still expanding. What we look at from the consumer standpoint is that they're just very concerned about the inflation impacts of this war. What does it mean? Um, how long are energy prices going to stay this high? So that's impacting confidence here. The other thing that we're watching closely is even though earnings are growing 3.6% on a year-v-year basis, headline inflation, the last read that we got at the CPI level was right was rising 3.3%. So real income here is very weak. This leaves very little room for error for the consumer. So we'll keep an eye on

Key Takeaways And Where To Listen

Megan Horneman 3:02

that. But so to wrap it up from this report, it definitely keeps the Fed on hold for the near term. We think through the the remainder of this year, with a chance we might have to see a rate hike in the fourth quarter. That's all we have for the this week. If you want a history of our podcast, you can go to marketswithmegan.fm. Thank you.