While the May 1 week starts off the month with plenty of data on the calendar, there are only two things likely to keep market attention.

First, the FOMC meeting on May 2-3 is expected to conclude with an increase of 25 basis points in the fed funds target range. It is also possible that the FOMC will be ready to signal a pause in further rate hikes. On the price stability side of the dual mandate, recent economic data are favorable for showing slower – but still uncomfortable — rises in wages and prices. The focus will be on the persistence of non-housing services inflation within the core measures of the CPI and PCE deflator. Nonetheless, there’s sufficient evidence that policymakers may be content to give the “long and variable lags” in interest rate increases more time to manifest. On the maximum employment part of the dual mandate, the economy continues to add jobs and absorb workers who have been laid off. The unemployment rate remains consistent with a tight labor market and labor participation remains below pre-COVID levels. If the US economy showed only a “subpar” up 1.1 percent increase in the first quarter, it is in line with Fed forecasts and won’t change the necessity to continue to fight inflation.

Second, the April employment report is not expected to change the story about a solid labor market. There may be a few more signs of the imbalances in labor supply and demand resolving, but many businesses are still hiring and relatively few are laying off workers. The early consensus for nonfarm payrolls is around up 200,000. Although slower than recent months, it would still be a healthy level. Past performance of the BLS report versus market expectations shows that there is a tendency to come in below the consensus. Moreover, payrolls are often further revised lower in the subsequent month’s report. April can be a tough month to forecast depending on the timing of the Passover/Easter observance and/or spring break for schools that means some workers are on temporary layoffs. It may also reflect seasonal differences of when businesses that support outdoor activities start to hire, particularly home and garden centers.

In any case, the April employment numbers are the first of the second quarter 2023 and will start the process of trying to forecast GDP and whether there will be a pickup in activity from the lackluster up 1.1 percent in the first quarter.

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