Scattered thoughts as some dust settles re jobs and broader economy:

–I strongly doubt this is any sort of game changer for the Fed. It’s a big mistake to extrapolate from the stronger than expected payroll number to an early liftoff on the federal funds rate. Why?

–Because they’re not moved by outliers and as shown below, the recent, smoothed trend in monthly payrolls shows little acceleration, with recent trend gains around 230K/month;

–They’re–Chair Yellen in particular–concerned about the depressed labor force rate, as they should be given its implications for macro growth. Even discounted the big monthly down tick in April, the trend there too is stuck at historically low levels.

–Wages and especially prices (core PCE) are just simply not indicative of inflationary pressure.

–More broadly speaking, crystal balls are just muddy right now: I didn’t love that 0.1% print on Q1 GDP, and as noted today’s household survey disappointed. But the payroll survey, which is more reliable than the HH, looks good—even better than expected.

–Maybe some weather in the GDP report, so I’d say pay more attention to yr/yr trend in real GDP of 2.3%. But the weather card feels a bit overplayed to me. Housing investment is clearly slowing and the growing trade deficit is a concern.

–So keep that champagne on ice. Let’s stipulate that GDP’s growing around trend–about 2%. Well, we’ve still got big output gaps to close, high unemployment (especially accounting for labor force decline), too many long-term unemployed, nothing-special wage trends, and depressed labor force participation. We need faster growth.

–If I were supreme ruler, I’d extend UI to help the long-term unemployed, but more so, I’d do some pretty deep infrastructure investment in public goods. And I’d stress dovish, or at least data driven, forward guidance at the Fed.

MONTHLY CHANGE IN PAYROLL EMPLOYMENT (000’s) AND SMOOTH TREND

Source: BLS (note: big spike in 2010 is temporary hiring around decennial Census)