One of the key indicators of a vibrant economy is job creation, and one of the greatest measures of inflation is wages paid.  Today’s BLS Jobs Report showed good news for both factors.

New Payrolls rose by 256,000 jobs, well above the forecasted 164,000 new hires and even surpassed last month’s robust 212,000. That unexpected 18% jump from the previous reading satisfies those concerned about a waning labor force and staves recession fears.  Plus, all those new people on payroll helps to bring the Unemployment Rate back down to 4.1%, which makes we who want to work feel a sense of assurance.

While the other facet of the Report points out that Average Hourly Earnings dropped from an annual rate of 4.0% to a 3.9% increase. Don’t get me wrong, I’m all for receiving higher pay for labor performed, and have a vested interest in those higher wages making housing more affordable, but if the goal is to get inflation down to 2.0%, attenuated wages are one of the most essential components of the formula and this is a step toward that objective.

So, overall, a very solid report.  The bond market, however, hates it, and interest rates have moved higher still.  Breaking through the highs of 2024, those rates now sit about 1/4% under the once lofty levels of 2023.  And rates will probably get worse before they get better.  One argument for that is the growing peak of bond issuance rising from the top of the already colossal $36 trillion mountain range of federal debt (AKA bonds), which is triggering renewed concern of a payment default.  Remember that as risk increases, so does the yield.  As of this morning, the likelihood of a Fed rate cut is less than 50% until at least their June 2025 meeting.