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Week In Review


Nonfarm payrolls increased by just 138,000 jobs in May, well short of the 182,000 expectation. In addition, payrolls from the previous two months were surprisingly revised lower by 66,000 jobs. The unemployment rate fell from 4.4% to 4.3%. Labor force participation dropped to 62.7% from 62.9%. Average hourly earnings rose 0.2% in May, but April figures were revised lower (from 0.3% to 0.2%). Year-over-year, hourly earnings have risen 2.5%

Our Take

This is a weak employment report. Payrolls came in far worse than expected in May and the downward revision to March and April added to the negative surprise. The drop in the unemployment rate was due to reduced labor force participation rather than increased hiring and average hourly earnings growth was less than expected. This report calls expectations for a Q2 rebound after a dismal Q1 into question, and may prompt the Fed to reconsider their 2017 tightening path should weak employment data continue.

Income and Consumption

Personal income and consumption both grew by 0.4% in April.

Our Take

Spending is rebounding from an anemic first quarter, driving expectations of increased economic activity as the summer season approaches. Inflation remains well contained, leaving the Fed with a more difficult decision on how to proceed with tightening.


Illinois lawmakers failed to pass a spending plan by May 31st. This is significant as budget approval will now require a three-fifths majority instead of a simple majority. Democrats, led by House Speaker Michael Madigan, blame Republican Governor Bruce Rauner for the stalemate. Governor Rauner blamed Democrats for failing to support cost cutting measures he has proposed. Madigan stated that lawmakers will continue to work on a budget plan during the month of June.

Our Take

The three-fifths majority to approve the budget is significant as Democrats will need Republican support to get enough votes to reach the new supermajority. Illinois has not had a budget in place for over two years. The state continues to struggle with unpaid bills and pension liabilities. In addition, the state owes school districts $1.1 billion, which has not been paid due to the stalemate. Illinois cannot afford for the impasse to continue. Rauner, Madigan and Illinois lawmakers must compromise and end the impasse.