Month: May 2026

By Paul Gomme and Peter Rupert

The BEA announced that the PCE price index rose 4.90% in April, down from the 8.27% March reading. The year over year number increased from 3.53% to 3.77% and our preferred trend measure rose 5.22% after a 5.38% increase in March. All well above the Fed’s 2.0% target.

The PCE price index excluding food and energy fell from 3.60% to 2.91%, the year over year number rose to 3.77% from 3.53% increase in March and the trend measure fell to 5.22% in April compared to 5.38% in March. Again, these inflation rates are well above the Fed’s stated 2% target.

In it’s second estimate of GDP for the first quarter, real GDP growth was revised down from 2.0% to 1.6%, mostly due to investment and consumer spending revisions.

The two reports don’t add much in the way of clarity as to future Fed Funds moves. The Fed-favored PCE is still solidly above the 2.0% target and the economy remains strong despite the downward revision to GDP. New Chair Kevin Warsh also adds to the uncertainty it becomes clearer what kind of Chair he will become.

The good news from the Bureau of Labor Statistics’s CPI report is that annualized monthly CPI inflation fell from 10.89% (March) to 7.96% (April). Compared to a year ago, prices are up 3.78% (April) compared to 5.47% (March). Our measure of trend CPI inflation rose from 5.47% to 6.30%.

Core CPI inflation (that is, excluding food and energy) rose from 2.38% to 4.61% on an annualized monthly basis; from 2.60% to 2.74% for the year-over-year. Our measure of trend core CPI inflation rose from 2.58% to 3.26%.

Of course, the big news is the energy price shock due to the ongoing conflict in the middle east. Looking at energy commodities (gasoline and fuel oil), April (92.8%) also fell compared to March, 919%, but the March number was in rarefied air, see the scale on the vertical axis. Moreover, inflation expectations have begun to creep up. The hope, of course, is that the oil supply problem will be a temporary blip.

The Personal Consumption Expenditure price index will not be released for a couple of weeks. While the CPI for April suggests that monthly PCE inflation may fall, all other measures — including the all-important core PCE inflation — are likely to continue moving away from the FOMC’s 2% target.

by paul gomme and peter rupert

The BLS announced that payroll employment increased 115,000 in April and March employment was revised up 7,000 to 185,000 and February was revised down 23,000 to 156,000.

The private sector added 123,000 jobs while the government sector shed 8,000, falling for seven consectutive months. Nearly all of the increase in employment came from the service producing sector, up 113,000.

Average hours of work rose from 34.2 to 34.3 and has been see-sawing between these two over the past few months. The increase in both private employment and average weekly hours means that total hours of work showed a strong increase. Average hourly earnings increased to $37.41 from $37.35.

According to the household survey the civilian labor force declined 92,000, the number unemployed increased 134,000 and then number employed fell 226,000. The end result was a slight uptick in the unemployment rate, from 4.26% to 4.34%. Note that, due to rounding, the BLS reported that the unemployment rate was unchanged at 4.3%.

While the establishment survey beat “expectations” and was taken as good news by the market, the household survey poured a little cold water on the outlook. Having said that, the labor market continues to exhibit more strength than weakness.