Employment Data - In January 2026, the U.S. added 130,000 non-farm jobs, significantly exceeding the forecast of 65,000 and a revised previous value of 48,000[5] - The seasonally adjusted unemployment rate fell to 4.3%, lower than the expected and previous rate of 4.4%[5] Sector Performance - Job growth was primarily driven by improvements in education and healthcare sectors, which added 84,000 jobs[7] - The goods-producing sector saw an increase of 36,000 jobs, with construction and manufacturing improving, while mining jobs decreased[7] Wage Growth and Inflation - Private sector hourly wages increased by 0.4% month-on-month, surpassing the expected 0.3%, with a year-on-year growth of 3.7%[7] - Core service inflation pressures are rising, particularly in the education and healthcare sectors, correlating with significant job growth in these areas[7] Interest Rate Outlook - Despite the strong employment data, the expectation for interest rate cuts remains unchanged, with a baseline expectation of no cuts during Powell's remaining term[7] - Following the appointment of Waller in May, there is a potential for at least 50 basis points of rate cuts within the year, influenced by tariff impacts on inflation[7] Risks - There is a risk of inflation exceeding expectations, which could hinder the possibility of rate cuts[6]

Group 1: Inflation Overview - The U.S. November CPI increased by 2.7% year-on-year, while core CPI rose by 2.6%, both below market expectations[2] - Overall inflation shows a significant downward trend, with November CPI down 0.3 percentage points from September, and core CPI down 0.4 percentage points[3] - Core service inflation is a key driver of the overall inflation decline, with a notable decrease in core service inflation contributing to the unexpected drop in CPI[4] Group 2: Energy and Food Inflation - Energy prices rose by 4.2% year-on-year in November, an increase of 1.4 percentage points from September, while food prices increased by 2.6%, down 0.5 percentage points from September[4] - Core goods inflation showed a slight decline, with core goods year-on-year growth decreasing by 0.15 percentage points compared to September[4] - The significant drop in core service inflation, particularly in housing, is a major factor in the overall CPI decline[21] Group 3: Future Inflation Trends - Inflation levels are expected to continue declining, with core inflation remaining a critical factor; the super core service inflation (excluding housing) decreased to 2.7% year-on-year in November[5] - The high base in December 2024 may lead to further declines in overall inflation levels, with core inflation potentially stabilizing or decreasing[5] - The uncertainty remains regarding whether businesses will raise prices in 2026 as the Fed's rate cuts begin to support the economy[5] Group 4: Federal Reserve Implications - The importance of inflation risk in Federal Reserve decision-making may decrease, as inflation trends show a clear downward trajectory and public inflation expectations are also declining[5] - Despite the decline in inflation, the Fed is unlikely to implement significant rate cuts in the short term, as inflation may not reach the 2% target until 2027[6] - The Fed is expected to monitor economic conditions closely, with a potential for 1-2 rate cuts in 2026, primarily in the second half of the year[6]

Group 1 - The report from the San Francisco Federal Reserve indicates a significant decline in net immigration to the U.S., dropping to approximately 515,000 this year, a nearly 70% decrease from 2 million in 2024 [1][3] - The decline in immigration is attributed to two main factors: a reduction in undocumented immigrants and a "slightly high" outflow rate of immigrants. The estimated number of deportations this year is around 285,000, exacerbating the shrinkage of the immigrant population [3][4] - The reduction in the labor force due to declining immigration could lead to a slowdown in labor force growth or even negative growth in the coming years, posing a significant risk to economic development [1][3] Group 2 - Labor shortages are expected to become more pronounced in low-skill and specific professional sectors, particularly in industries like agriculture, construction, and healthcare, which have long relied on immigrant labor [4] - The decrease in immigration may have a potential positive impact by helping to lower core service inflation, as a tight labor supply often drives up wage levels, which in turn affects service prices [4] - The current economic environment in the U.S. is at a critical juncture between balanced growth and inflation, making labor market stability essential. The findings of the report highlight the need for policymakers to find a balance between immigration policy adjustments and labor market demands to avoid long-term economic impacts [4]

Core Insights - The Federal Reserve Governor, Christopher Waller, indicates that a surge in imports expected in the coming months will reverse, signaling a potential for larger price increases [1] - Core services inflation remains above pre-pandemic levels, suggesting persistent inflationary pressures in this sector [1] - Improvement in core goods inflation has shown signs of reversal, indicating challenges in controlling inflation in this category [1]

Core Viewpoint - The article discusses the ongoing trend of cooling inflation in the U.S., highlighting the April CPI data and its implications for future economic conditions and monetary policy [1][10]. Inflation Trends - April CPI year-on-year growth slightly decreased to 2.3%, the lowest since February 2021, while core CPI remained stable at 2.8% [1]. - Energy prices saw a year-on-year decline of 3.7%, influenced by global trade uncertainties and a high base from the previous year [3]. - Core services inflation decreased to 3.6%, with housing and transportation services continuing to show downward trends [5]. - Core goods inflation turned positive at 0.1%, primarily due to a lower base from the previous year, with some categories like furniture and appliances showing increases [6]. Energy Sector Insights - The year-on-year growth rate for energy in the CPI recorded a decline of 3.7%, with gasoline prices dropping by 11.8% [3]. - Brent crude oil prices fell to an average of $67.9 per barrel in April, further decreasing to $62.7 per barrel in May, indicating a potential for sustained low energy prices [3]. Service Sector Analysis - Core services inflation pressure is expected to continue easing, with stable housing inflation and a slight decrease in owner-equivalent rent growth to 4.3% [5]. - Transportation service prices also showed a year-on-year decline, contributing to the overall easing of service inflation [5]. Consumer Expectations - Consumer inflation expectations rose, with the one-year expectation increasing to 6.5%, the highest since November 2023, driven by concerns over tariff policies [8]. Monetary Policy Implications - Following the inflation data release, U.S. stock indices rose, and bond yields fell, suggesting market reactions to the inflation trends [10]. - The ongoing tariff policies and their delayed impact on inflation may lead to a postponement of interest rate cuts by the Federal Reserve, despite the cooling inflation [10].