Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)In the payroll report, the workweek at 34.3 was as expected and unchanged m/o/m. Average hourly earnings were up by .4% m/o/m, one tenth more than expected and with a 3.9% y/o/y gain. Combining the two saw average weekly earnings higher by .4% m/o/m and 3.9% y/o/y.

2)In the ADP jobs report, there wasn’t much change in wages from April but still pretty good with ‘job stayers’ seeing a 4.5% wage gain, the same pace last month. For ‘job changers’, wages rose 7% vs 6.9% in the month before.

3)Challenger said hiring plans did increase by 57% y/o/y but also said, “it remains historically low when compared to pre-pandemic and early-pandemic years.”

4)The April job openings count was 7.39mm, up about 200k m/o/m, above the estimate of 7.1mm and vs 7.48mm in February. The hiring rate rose one tenth to 3.5% after four months of 3.4% prints. The quit rate though slipped one tenth to 2%.

5)Mathematically good for GDP but obviously tariff distorted, the April trade deficit plunged to $61.6b because of a 16.3% collapse in imports, well more than offsetting the 3% rise in exports. The estimate was $66b and down from $138b in March.

6)Steel companies get the benefit of 50% tariffs on their competitors. The impact is more mixed for aluminum companies.

7)From Dollar General: Comps were up 2.4% y/o/y in the quarter, "driven by growth of 2.7% in average basket, including relatively similar increases in average unit retail price per item and average items per basket. Customer traffic slightly decreased by .3% during the quarter, but remained strong on a two year stack as we lapped the 4.3% traffic increase from the prior year's first quarter. We are excited to see broad based category growth during the quarter with positive comp sales in each of our consumables, seasonal, home and apparel categories."

8)From Dollar Tree: "Each week, more shoppers across a diverse range of economic and demographic backgrounds are responding to the appeal of Dollar Tree's unique value, convenience, and discovery proposition...New customers and increasing trip frequency are both driving share gains…Trade-in trends remains strong as we attract customers from other retail channels. In recent quarters, higher income customers have been a meaningful growth driver for us. In Q1, we had measurable sales improvement across all income levels, with the most growth coming from our higher income customers. In particular, we saw a meaningful traffic increase from customers with household incomes of more than $100,000, demonstrating Dollar Tree's broad appeal."

9)From Five Below: Their comps grew 7.1% and via increased transactions of 6.2% and comp ticket of .9%. Their strategy, "Providing fresh, trend-right, and quality products at amazing value is what we are known for and what makes us special."

10)From Cracker Barrel: "In our third quarter, as we noted on the last call, February started out a bit challenged as a result of both weather and some consumer uncertainty. Then we saw improvements into March and into April. And then we're particularly pleased that improvement continued further into Q4."

11)From American Express: On business, "It's really been consistent. What we've seen through May is what we saw through April and what we saw in March and in the first quarter, and so goods and services consistent. Airline, pretty consistent, and we said that was down a little bit. I think lodging gets a little more challenged, but restaurant is still very, very strong. And if you look at the individual segments, international, SME, and US consumer, pretty consistent to the way they are. So, unless something crazy happens in June, I think when we start talking about this in July, we're going to say, the second quarter pretty much looked just like the first quarter did, FX adjusted, and all that other kind of stuff."

12)From MasterCard: They reported earnings on April 28th, so this view is obviously a month later. "Now, if you include the first three weeks of May, we see exactly the same. So, spending trends have largely been the same, Now, if you look at this a little bit closer and then you'd say, why is that? If you look at the headlines, if you look at the sentiment surveys, and we just saw one yesterday, it was surprisingly positive. So, you see a lot of rhetoric there, and you see a lot of headlines, and it hasn't really translated into consumer behavior. So, why is that? Because the underlying support of the labor market continues to be there. We still have low unemployment, and we have wage growth that is kind of keeping up with inflation, above inflation. So, purchasing power is solid, which are both key drivers."

13)From Signet Jewelers: "We delivered positive same store sales growth each month of the quarter, and into May, by bolstering our offerings at key price points and continuing the evolution of our assortment. Our three largest brands - Kay, Zales, and Jared - all saw sequential comp sales improvement from the fourth quarter on higher margins, highlighting the impact of our outsized focus on our larger brands."

14)From Broadcom: Their AI chip business is seeing huge growth, up 46% y/o/y in the quarter just reported and in the current quarter they are in they see 60% y/o/y growth.

15)Depending on one’s view of the Canadian economy, this could have been a negative instead. The Bank of Canada kept policy unchanged as expected at 2.75%.

16)The Reserve Bank of India cut rates by 50 bps to 5.50% where only 25 bps was expected. While India is already seeing solid growth, the RBI Governor said "Our aspiration is to grow at 8% and we would like to grow as fast as possible."

17)China's May private sector services Caixin PMI rose a touch to 51 from 50.7 and as expected. Caixin said, "Overall sentiment remained positive in the Chinese service sector midway through the 2^nd quarter of 2025. Firms were hopeful that improvements in global trade conditions and business development plans could help to spur sales and boost activity levels over the next 12 months. The level of confidence strengthened since April, but remained below average."

18)The May Eurozone services PMI was revised up from its previous read to 49.7 from 48.9 but still down from 50.1 in April and is the lowest since last November. S&P Global said "A shaper drop in international orders was partly to blame, with export sales also falling to the quickest degree since November last year."

19)The UK May services PMI held above 50 as it was revised to 50.9 from 50.2 initially and up from 49 in April and vs 52.5 in March. S&P Global said, "The service sector regained its poise in May as receding concerns about US tariffs, recovering global financial markets and greater confidence among clients all helped to support output growth."

20)The Eurozone May CPI was higher by 1.9% y/o/y, down from 2.2% in the month before and one tenth less than expected. Helping to keep a lid on the headline was the 3.6% y/o/y drop in energy prices. The core rate slowed to 2.3% y/o/y from 2.7% and that was also one tenth below the estimate.

21)China's state sector weighted manufacturing PMI rose a .5 pt to 49.5 as expected. The non-manufacturing component remained above 50 at 50.3 vs 50.4 in the month before.

Negatives,

1)Payrolls in May rose a net 139k, 13k above expectations but the two prior months were revised lower by a combined 95k. There was a large decline of 696k jobs in the household survey but is very volatile month to month. As this though matched the 625k person decline in the labor force, the unemployment rate held at 4.2% for a 3^rd straight month. Helping to explain the big drop in the labor force was the participation rate that fell to 62.4% from 62.6% and that matches the lowest since December 2022. The participation rate for the key 25-54 yr old age cohort also fell two tenths m/o/m to 83.4% but after rising by .3% last month. Also, there was a big drop in the ‘job leavers’ category. This fell to 9.8% from 11.8% and that’s the least since May 2021. Of note too, the number of people who are working part time because they can’t find full time work rose by 125k people to the most since April 2019. Smoothing out the monthly data has the 3 month headline payroll average at 135k vs the 6 month average of 157k and the 12 month average of 144k.

2)ADP said there were just a net 37k private sector jobs created in May after a 60k person rise in April. That was well under the estimate of 114k. Small business not just reigned in their hiring, they shed workers on a net basis with companies with less than 50 workers losing 13k jobs. Also of note, large companies, those with more than 500 employees, let go a few thousand. So, the only area of job growth was the 49k person gain for medium sized businesses.