Economic Update 6/9/2026

On Friday of last week, we saw the much-anticipated release of Nonfarm Payrolls for the month of May. For May, job additions totaled 172,000. This was well above the forecasted level of 85,000 new jobs for the month. Initially, the April report showed employment growth of 115,000, but it was revised upward to 179,000. Overall, March and April together were revised upward by 93,000. The final March number showed a gain of 214,000 new jobs.

Following the two recent revisions, the May report was the third strongest during the past twelve months. As has typically been the case, hospitality and healthcare dominated the sectors reporting the highest levels of new jobs. However, we did see manufacturing payrolls increase by 7,000 during May. This was above the forecasted level of 2,000 and compared favorably to the essentially unchanged reading in April.

Positive Gains

We view the gains in manufacturing employment in a very positive manner. One of the key programs associated with this administration is to grow manufacturing in the U.S. to produce more goods internally and be less reliant on foreign suppliers.

Other factors within the report are also critical. The unemployment rate remained unchanged for the third straight month at 4.3%. Also, average hourly earnings rose by 0.3% during May. This was a positive comparison to the 0.2% gain in the prior month. This was also the strongest earnings gain in four months.

The average workweek for private payroll workers remained unchanged at 34.3 hours. This continues to indicate that a significant percentage of new jobs are in the part-time category. However, the average work week for manufacturing employees was 40.4 hours. Again, this is a very positive reading as it relates to the manufacturing sector.

Manufacturing with the U.S.

It is probably important to explain my comments relating to manufacturing within the U.S. and why the Trump administration continues to emphasize growth in the manufacturing sector on a domestic basis. Much like the Reagan years in the 1980s, they are trying to lower the higher inflation levels inherited from the prior administration.

Remember the term “Supply-Side Economics”? It’s important to realize that higher inflation is caused by too few goods being purchased with too many dollars. In simpler terms, demand exceeds the availability of goods. This causes the price of products to increase.

The key to Supply-Side Economics is just the opposite. The supply of goods exceeds demand. This results in lower product costs. The cost of related services also fits within this dynamic. By encouraging and providing the ability to grow manufacturing and production within the U.S., we will see costs lowered and inflation come down over time.

Focus on the Fed

I think the above is also critical as we are now in a change of leadership at the Federal Reserve. The new Fed Chairman, Kevin Warsh, has officially taken the position previously held by Chairman Powell. I don’t believe we will see any rate changes next week during his first official Fed meeting. He needs to gain some credibility within the investment and economic community.

However, I still believe we could see a rate cut before year-end if inflation begins to peak and move lower. The unknown in this view continues to be how the ongoing negotiations between the U.S., Israel, and Iran proceed and whether a final cease-fire resolution is reached.

At that point, we should see the availability of oil increase on a worldwide basis. The current rise in inflation can primarily be associated with higher energy costs. These higher costs are directly responsible for increases in transportation, electricity, and overall manufacturing costs. Each of these factors contributes to the costs associated with goods and services.

The next few weeks relative to activity in the Middle East will be a key factor in determining inflation and economic activity during the second half of the year.

A Positive Outlook

We have generally maintained our positive outlook for the financial markets. While we have reduced portions of some of our technology names by taking significant gains, we have not sold the entire positions. We have also expanded our exposure to other economic segments to broaden our holdings.

Look for those activities to continue. We are also adding to fixed-income holdings in a cautious manner. Given our outlook for an interest rate cut by year-end, this activity seems appropriate.

Our overall outlook remains positive, but we cannot ignore the ongoing dynamics between the U.S., Israel, and Iran.