Fed Meeting Insights: What to Expect from Powell and Economic Projections

Now this morning we are digesting the latest US retail sales figure which came in below expectations.

In terms of economic data, May non-farm payrolls the last month showing a gain of 139,000 jobs, but hiring did slow down.

The unemployment rate for May in the US was unchanged at 4.2%.

Meanwhile, the ADP employment figure for the latest month and recent jobless claims reflect other areas of the labor market.

Private payrolls added just 37,000 workers last month.

The lowest increase in over 2 years.

Well, the Federal Reserve's June meeting is underway and the board of governors will factor in labor market data along with inflation figures.

Joining me to break this down is Mark Hamrick, senior economic analyst at Bankrate.

Well, Mark, good morning.

Thank you so much for joining us.

We just got the release of US retail sales, but I want to start out with your take on the US labor market when we look at the recent slew of jobs figures.

So what do you make of the state of the labor market right now?

Good to be with you, Remy, and I think that when we look at the job market these days we are a bit spoiled by our experience and memories of the post-pandemic job market.

We tend to really have short memories, and that's true of those who analyze the economy as well in the sense of really perhaps having a bias toward what the more recent experience has been.

Compared to the historical norms and so that's sort of where I'm going with this.

We're seeing a job market that's continuing to normalize, but obviously also having to weather and process things that are not, let's say, in keeping with our experiences over the long term.

And I'm really talking about tariffs, the volatility of policy coming out of Washington.

To which all leads into uncertainty.

And so there is a price to be paid for uncertainty as well as for the injection of some of these policy priorities, including tariffs.

I mean, 4.2% unemployment rate.

You wouldn't typically complain about that, but it does seem to be pointing to further softening, particularly when we look at the trend with payrolls and four straight months of downward revisions on the previous months.

Yeah, and Mark, you bring up an important point because with the G7 underway, the president has left that gathering early and he's back in the nation's capital.

Also taking place in DC is the Federal Reserve meeting with the rate announcement expected tomorrow afternoon.

But all eyes are on the summary of economic projections as well as what Powell has to say.

So what are you looking for from Powell's statement and also in terms of the details from the SEC SEP?

Yeah, as you know, I do attend those news conferences, so I'll be there in the room, and you're absolutely right, Remy.

There is a tendency to sort of push the stuff that we expect aside and try to dive into what the new information is, and that really is going to be, I think, unless there's some change in the wording in the statement, and that certainly could be the case and certainly Chairman Powell could inject some new interpretation into where interest rates and monetary policy are or are headed, but I really do think the would-be devil in the details in this is going to be the projections about interest rates between now and the end of the year, as well as the economic observations on members.

Of the FOMC, I don't tend to put a lot of, dare I say, stock in the projections for interest rates going out more than 6 months or so because that ends up really being guesswork.

I mean, it's, you know, these are members of the FOMC.

Their guesses are worth more than just about anybody else when it comes to this conversation.

But, you know, is there still a prospect for a 50 basis point reduction in the benchmark rate this year?

Are they dialing down on that?

Because we know there's this really sharp divide in the sense of scenarios where maybe the economy remains more resilient or maybe we actually do get some damage from the tariffs in the form of a one-time price adjustment that could lead to more inflation risk.

And of course the problem with inflation expectations being so heightened right now, which is among the major warning signs that FOMC members are looking at.

Yeah, and finally, Mark, I do want to ask you about your take on what's happening in the Middle East and what the outlook is for commodities amid the Israel-Iran conflict because right now we are looking at oil holding below 70 $75 a barrel, but in the near term, if oil futures or energy prices do climb, what, what does this mean for inflation and in turn the American consumer?

Well, first of all, obviously, you know, our first thoughts about this are the humanitarian aspects and the fact that lives are being affected and people are losing their lives in this war, and that's the most devastating aspect of all that.

The most remarkable thing is that oil production has not been affected so far, and we know that we have great capacity for that in the United States.

We have ample supplies at the moment and so I think if you're looking at it from Purely market perspective, the key here really is, is the flow of oil being maintained or is there some damage to that?

And the fact that we've kept crude prices where they are in the midst of this shooting war to me is nothing short of remarkable.

And then piggybacking on that is it's sort of another day at the NYSE.

Where everything appears to be relatively normal, obviously within the context of, you know, the given movements of the market on a day to day basis.

So watch the watch the price of oil, watch whether the supplies of oil are sustainable.

If we can get through this without a problem with that, then we will have made it unscathed, at least from a market perspective.

OK, Mark, well, we will have to leave it there, but thank you as always for joining us and thank you for sharing your perspective.