Fed Watch – 6/6/2025

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hi, I’m Lauren Saidel-Baker and thank you so much for joining me for this June 6th edition of Fed Watch. It’s been a busy day for the numbers. We got new jobs report dropped this morning and the number was pretty good, 139,000 jobs.

That was slightly higher than expected, although we did get some downward revisions to recent data reports in the past couple of months. So where does this leave the labor market and more importantly, what does that mean for the Fed going forward?

As we at ITR have been saying for quite some time now, the labor market is still stable. We’re coming from an incredibly tight starting point. So this cooling, some of the cooling in the labor market really did have to happen.

We’re due for a little bit of a pause here before this general demand, this resurgence in economic growth starts to cause that pickup again. One of the numbers that I like to follow closely is that balance between unemployed workers and job openings.

And while that did recently tick back above a one to one ratio, I like to also point out that historically that number spends much more time above one than it does spend below or at one. So while we do have one worker seeking work for each job opening out there, our typical business environment is that businesses expect to have multiple job seekers for each available posting.

Now, we’re also in a bit of a unique situation with this labor market. No one feels great right now. I think this feeds into the broader narrative of uncertainty that we get when we talk tariffs, when we talk political developments, but we’re in something of a unique position today where there’s not much confidence on the employee side.

I know we hear this on the street. I hear it from my friends and when we’re just out there in the world of business, but people don’t feel great about their ability to find a job today. That’s part of the general loosening here.

At the tightest, we had two jobs for every one unemployed job seeker. So today, things do feel marginally worse. We see that reflected in the data, not just in sentiment, but in things like the quit rate.

We typically see a lower quit rate when people don’t feel so good about their ability to quit their job, go out and find another one, or maybe they even have something lined up already. So that relatively lower quit rate today, that is a mark of less confidence on the employee side.

Very interestingly though, we also have less confidence on the employer side. Typically, when we see a lower quit rate, we see higher layoffs and discharges, right? We either have the ball in the employee’s court or the employer’s court.

But interestingly today, we don’t. We see relatively low layoffs and discharges. charges. Now, hiring also isn’t firing on all cylinders. This is not the breakneck competition that we saw in 2021 and 2022.

Anything we could do to grab those workers to bring them to our business, not the guys across the street. So at the end of the day, where does that leave us? Well, in this uncertain environment, businesses also don’t want to be overstrained.

They certainly don’t want to be taking on more headcount than they need when they don’t feel so confident about the path forward. But they also don’t want to be losing that top talent. And I think that’s good advice.

Businesses know they were caught short handed once already, they still have that very recent memory. So they just don’t want to lose a lot of that employee base and then be struggling when demand does pick up trying to backfill trying to replace.

So all in all, it feels like a continuation of that wait and see environment. Broadly speaking, the labor market is still quite tight. This is still a strong at least stable labor market. And the Fed knows that they’re really seeing this play out in their balancing of full employment.

When we contrast that with generally higher inflation expected going forward both for tariff and non tariff more fundamental reasons. I think the balance of the Fed is again, taking a pause, we might see another rate cut very soon.

But we also might not. This is certainly not as baked into the expectation as it had been very recently. So all eyes on the Fed, all eyes on those inflation numbers coming out soon. But for now, at least the labor market side of the dual mandate seems to be holding up quite well.

We’ll keep coming at you with all of these numbers as we get them going forward. Thank you so much for joining me today on Fed Watch. We’ll see you next week.