- US payroll growth slowed at 75k in May, well below expectations and partly due to floods in the Midwest. The unemployment rate remained broadly in line with the last readings, while wage growth eased.
- Revised Q1 figures confirmed the pick-up in labor productivity, which is helping containing unit labor costs. Additional evidence that labor market slack is higher than previously thought was presented at the Fed conference on monetary policy strategy this week.
- The labor market developments add to mounting signs of slowing US growth. Moreover, persistently weak inflation expectations and the growth risks from the US/China trade war now make us expect at least one rate cut by the Fed already this year (likely September, but with risks tilted towards an earlier move).