Macro Observations

The market got two pieces of labor market data this week and presented a real dichotomy in “is the labor market healthy or not”. The fact that they’re presenting different narratives makes it worth exploring a little more. In this economy, the biggest question now is whether the ADP or NFP report is providing a more accurate picture of the labor market?

It’s probably no secret that Donald Trump doesn’t like Jerome Powell. The fact remains that the Fed Funds rate hasn’t moved at all in 2025. There’s nuance to how one should view the unemployment rate and the GDP growth rate. The high level numbers most often appearing in the financial media don’t always tell the whole story. If you look at the more complete picture, there are some troubling trends.

The Fed doesn’t have a good handle on the current economic situation and could very well just make things worse. There is more than enough evidence to suggest that inflation risk is still not contained and the Fed might be well served to keep monetary conditions restrictive until those latter figures cool down a bit. The data is disconnected enough right now that there’s a legitimate case building for why the Fed should consider hiking.