The BLS reported 172,000 jobs added in May, but employment is a lagging indicator that often looks healthy while the economy is already deteriorating.
Only 9% of small business owners plan to hire over the next 3 months, which is the weakest reading since May 2020, while labor costs hit an all-time survey high.
Small-business hiring plans historically lead private payroll growth by 4 months; after 6 straight months of decline, negative payroll growth could arrive by Q3.
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Economic data rarely tells a clean story. One report points to strength, while the next hints at trouble. Inflation is a perfect example. The May Consumer Price Index jumped to 4.2%, yet core inflation -- which strips out volatile food and energy costs -- has remained far more manageable. The same pattern appeared in producer prices. Headline PPI soared to 6.5%, but core PPI came in well below forecasts because much of the increase was driven by energy costs rather than broad-based inflation pressures.