The data from last week confirmed the strong labor market with little inflation condition.

The April labor report was much better than anticipated. Nonfarm payrolls increased by 263,000, well above the 185,000 consensus forecast. The prior two months were revised higher by 13,000. The average monthly gain in the first four months of this year now stands at 205,000 even with the February report of only 56,000. The unemployment rate dropped to 3.6% from 3.8% largely due to the drop of 490,000 in the size of the workforce. There were less people looking for work who were out of a job. In spite of this tight condition, average hourly earnings increased by 0.2% for the month and have risen by 3.2% over the last twelve months.