Jobless numbers might not indicate slowdown due to week-to-week volatility, says Point72's Dean Maki

Now let's begin with the economy. That data showing inflation and the job market both cooling at the same time. Producer prices dropping 2/10 in May, much softer than forecasts of a gain and the biggest decline since October. Year on year PPI rose 2.2% X food and energy. It was flat on the month and up 2.3% from a year ago. It was all below expectations. Jobless claims meanwhile, they were up to 242,000 last week. That's the highest level since last August. Forward bonds chief economist Chris Ruppke warning it looks like the Fed's monetary policy restraint has overstayed its welcome as the economic skies grow darker, with job layoffs surging and producer prices falling. Let's talk about it with Dean Mackey, chief economist at .72, and CNBC senior economics reporter Steve Liesman. Great to have you both here. Dean. What do you make of the data? Are you worried the jobs market is cracking? No, I'm not worried about that. The jobless claims numbers are volatile week to week. I think the, the employment report last month was, was quite impressive, 272,000 jobs gained. And that's, that's, I think is, is more important than one week split up in jobless claims. Steve, do you think the Fed will look back at this and say, oh, we should have done more in the meeting, maybe talked about two cuts this year and so forth? I'm sort of with Dean on this for the moment. There is some holiday stuff in this number that might have messed us up here. We've been in this range, Kelly, and it looks 240 is towards the top of the range. 200 is kind of the bottom. I don't usually get worried about Jabba scam. So they're in the 250. But I'm, you know, if you hadn't put up that Chris Ruppke comment, I was going to put it up. And my concern is actually from a different standpoint. It's not necessarily weakening demand, it's shrinking profit margins. And I think we might be in a place where where profit margins might be coming down. And if you think about a, say a small business owner wants to protect his or her income, what would they do? Well, that's where you start to layoff people, not necessarily in order to be because demand is weak, but because you're trying to protect how much money you're bringing home. And that's one concern I have because we do see, I do believe we're in a period of time when prices will begin to roll back at least partially. And some of those profit margins could be be coming down, could be coming. So at the same time, Dean, this could be a positive development. I mean, the best, best case scenario, let's not forget, if we ignore the jobless claims and say it's a fluke like it was last year and all we know is that producer and consumer prices are cooling, that's a lot of relief both for the economy and for profits. That's right. I think there has been good news this week on both the CPI and the PPI front. And, and we'll see that later this month with the core PCE number. That's what the Fed needs to see. They need several months of these types of numbers before they're, they're willing to cut rates. And so I do think that inflation coming down is a positive story for the economy because it eventually it will allow the Fed to reduce rates. On a kind of side note, that's not so much of A side note. Yesterday, Chair Powell referenced that perhaps the payroll data is overstated and there's been some back and forth on this something the birth death model isn't capturing deaths and that we know that payrolls will be revised down by 60 KA month last year because of the quarterly data. Goldman, meanwhile, is saying no, no, don't trust the quarterly claims data because unauthorized immigrants can't claim them. So actually, the first read of payrolls is closer to the truth and we can trust the 272. Which camp are you in, Dean? I think they're, they're both both arguments can be true. It you know, we always get revisions to payrolls due to the usual sampling errors, etc. So it wouldn't be shocking if we did see some downward revision in the direction of where the the sense of quarterly census is telling us. At the same time, that is a very important factor. One of the dominant things over the last couple of years has been an unexpected increase in immigration flows. That's been important for labor supply increases and that's allowed the economy to run hot without overheating the labor market. So, so I do think that's important to realize that in it because of that factor, revising to the quarterly census numbers might actually make the numbers less accurate. Absolutely. I find Steve that fascinating because I mean, imagine, try to explain to people, OK, we originally reported 250,000 jobs a month. No, no, that's going to be under 200. No, no, that number might be misleading. And actually it could be 280 if you include unauthorized workers. Yeah, that's a good reason to step back and maybe not sort of think about either your investment decisions or or or your monetary policy decisions with quite the precision that people are looking for. In general, Kelly, you could say the job markets pretty strong, 272, maybe it's 225, maybe it's 350. It's in that range of being pretty darn strong. On the other hand, what what has concerned me a little bit is the unemployment rate has been ticking up. I don't know if it's sticking up to a normal level and it goes, it goes this way. We had Gun lock on the other yesterday saying he wouldn't be surprised with a 4.4%. I was surprised, Kelly, with a lot of the estimates of the Federal Reserve among them, they have a 4% average year and unemployment rate, we're already at 4%. Do they not see any weakening? And again, that 2.8%, which I understand after Powell explained it to me in the press conference yesterday, has a lot to do with the base effects rolling off of of lower numbers in the past not becoming part of the future calculation. I get that. But how do you signal that? Do you or do you not expect further improvement in inflation as the year goes on?

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