Main points from the impressive May employment report

As the economy continues to recover from the impacts of the pandemic, all eyes are now turning to next week’s CPI inflation report. Job growth and wage growth have been positive for Americans, but concerns are rising about the potential for faster inflation.

Recent data shows that average hourly earnings have increased by 4.1% over the past year, a significant jump that has caught the attention of economists and policymakers. Diane Swonk, chief economist with KPMG, explained that the wage gains are primarily concentrated in the service sector, where inflation has been most pronounced.

The Federal Reserve, which does not directly target wages, is closely monitoring the situation. Swonk highlighted the challenge of balancing wage increases with the need to control inflation, particularly in sectors like personal care services, cleaning, and vehicle maintenance.

The upcoming Consumer Price Index report for May will provide crucial insights into the trajectory of inflation. Early projections suggest that consumer prices may have slowed on a monthly basis, offering some relief to policymakers. The report will be released on Wednesday, coinciding with the Fed’s latest monetary policy decision.

As the economy continues to navigate through uncertain times, the CPI report will be closely watched to gauge the impact of wage growth on inflation. Stay tuned for updates on this developing story.