News

Economy, the Fed, and Rates…

May 12, 2026

Economic Data & Labor Market

• April payrolls beat, but the labor signal is uneven. Employers added 115k jobs in April, versus 65k in the Bloomberg consensus and 55k in the WSJ consensus. March reading was revised up to 185k, while February was revised down to a 156k loss. The unrounded unemployment rate ticked up to 4.34% from 4.26%, U-6 rose to 8.2%, and participation fell to 61.8%, the lowest since October 2021. The headline says resilience; the internals say caution.
• Hiring broadened, with freight doing much of the work. Healthcare and social assistance added 54k, transportation and warehousing 30k, retail 22k, and couriers/messengers nearly 38k, the largest gain since 2020. Bloomberg Economics sees the freight gain as evidence of stronger industrial momentum. Still, some of it likely reflects oil exports, rerouting, inventory hedging, and trade adjustment rather than a clean cyclical reacceleration.
• Information-sector losses remain the clearest AI-adjacent warning. Information employment fell for a 16th straight month and is down ~342k, or 11%, from its November 2022 peak. The packet does not prove AI is the sole driver, but tech-sector cuts and information-sector weakness remain where labor substitution is most visible.
• Consumer sentiment is the recession-looking data point. Preliminary May UMich sentiment fell to 48.2 from 49.8, a fresh record low. Current conditions hit their lowest level on record, and consumers’ view of their current financial situation fell to the lowest since 2009. One-year inflation expectations eased to 4.5% and 5-to-10-year expectations to 3.4%, but both remain elevated.
• Productivity helps, but does not solve inflation. 1Q productivity rose 0.8% annualized and 2.9% YoY, the strongest annual pace since 2024. Unit labor costs rose 2.3%. The labor share of nonfarm business output fell to 54.1%, the lowest in the series dating back to 1947. Inflation pressure points include energy, imports, freight, and pass-throughs, not wages overheating.

Federal Reserve Policy & the Warsh Transition

• The payroll report keeps the Fed focused on inflation. April hiring was strong enough to remove the urgency to cut. Money-market pricing now implies the Fed stays on hold through year-end 2026, with some hedging for a possible 2027 hike. The next test is April CPI, with Bloomberg Economics expecting 0.6% MoM headline, 3.7% YoY headline, 0.4% MoM core, and 2.7% YoY core.
• The FOMC’s easing bias is under attack. Logan, Hammack, and Kashkari dissented from the April 29 statement language, suggesting the next move would more likely be a cut. Hammack called that language “a little bit misleading.” Collins, a non-voter, agreed the statement should be more agnostic and said she would strongly consider a hike if inflation moved materially in the wrong direction.
• Warsh inherits a harder committee than markets initially priced. Warsh may prefer easier policy and balance-sheet reform, but he will face a visible hawkish bloc if he chairs the June 16-17 meeting. Bloomberg Intelligence’s practical point: Warsh will need time and persuasion before cuts become viable.
• Goldman moved its first cut to December 2026. Goldman pushed expected Fed cuts to December 2026 and March 2027, delayed by one quarter, because energy pass-through is likely to keep core PCE closer to 3% than 2% through year-end. Goldman lowered its 12-month recession probability to 25% from 30%, still above its 20% pre-war estimate.
• The global central-bank split is widening. Norway delivered a surprise 25 bp hike, its first since 2023, and Australia has hiked at three consecutive meetings. The Fed is not Norway or Australia, but the G10 backdrop makes a simple “Warsh cuts quickly” story harder to defend.

Treasury Yields & Bond Markets

• Treasuries ended mixed, not in a clean selloff. Per Bloomberg Friday closes, the 2-year was flat on the week at 3.88%, the 10-year down 2 bps to 4.35%, and the 30-year also down 2 bps to 4.93%. The 30-year briefly broke above 5% earlier in the week before duration buyers stepped in. It remains only 16 bps below its 52-week high.
• The curve message is less panicked, not easier. The front end remains elevated because cuts are not imminent; the long end eased because buyers stepped in near 5%, and oil slipped. For CRE, a 10-year at 4.35% still keeps fixed-rate financing costs elevated.
• CPI and refunding are the next rate tests. Bloomberg Economics expects another hot headline CPI print, with gasoline up another 7% after March’s 21% increase. Treasury also has a heavy auction schedule: $58B of 3-year notes, $42B of 10-year notes, and $25B of 30-year bonds.

Dollar, Commodities & Market Dynamics

• Equities keep looking through the shock as earnings and AI dominate. The S&P 500 closed at a record and posted its sixth straight weekly gain; the Nasdaq Composite logged its 11th record close of 2026. Roughly 82% of S&P 500 companies have beaten 1Q profit estimates, and chipmakers rose 11% on the week.
• Oil eased, but Hormuz still controls the macro tape. WTI closed Friday at $95, down on the week, while Brent was near $100 in the Bloomberg Briefs snapshot. The U.S. and Iran are working through mediators on a framework for talks, but fresh clashes near Hormuz show the ceasefire path remains fragile.
• Inflation pressure is broadening beyond crude. The UN food-price index rose 1.6% in April to its highest level in more than three years. Bloomberg Economics expects April PPI to be 0.6% MoM and 4.9% YoY, with transportation and warehousing the largest core contributor, driven by diesel, jet fuel, and stronger freight activity. Import prices are expected to rise 0.9%, with ex-petroleum up 0.6%.

CRE Finance Market Implications

• Floating-rate borrowers have less near-term hope. Markets now price the Fed on hold through year-end 2026, and Goldman pushed its first expected cut to December 2026. That delays SOFR relief for bridge and transitional loans.
• Inflation is hitting CRE through freight, fuel, and construction inputs. Expected April PPI strength in transportation and warehousing, import-price pressure, food-cost increases, and energy-linked materials all flow into operating expenses and development budgets.
• Data centers remain strongest CRE demand engine, but the benefit is narrow. AI-linked spending supports data centers, power, equipment, and logistics demand. But broader CRE does not automatically share in that capital-market tailwind; non-data-center development and transitional deals still face selective lenders, higher coupons, and tougher refinancing math.

You can download CREFC's one-page MarketMetrics, which includes statistics covering the economy and the CRE debt capital markets, here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

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