Increases in private wages and salaries led to a +0.4% increase in personal income in April’s Personal Income and Outlays report. Personal Consumer Expenditures (PCE) also increased by +0.4%, led by increased purchases of recreational goods and vehicles, and gasoline. The PCE core price index, the Federal Open Market Committee’s (FOMC) preferred measure of inflation, was up by +0.2% after March’s -0.1% decrease, bringing the Y/Y core price index to +1.5%, which is below the FOMC’s target +2.0%.

May’s unemployment rate dropped to 4.3%, with a decrease of 429,000 in the civilian labor force overriding the effect of a decrease of 233,000 in the number of employed. A lower than expected 138,000 jobs were added, with downward revisions for new jobs in March from +79,000 to +50,000 jobs and for April from +211,000 to +174,000 jobs. The average workweek was unchanged at 34.4 hours, and average hourly earnings were up +0.2% M/M, and 2.5% Y/Y.

The trade deficit widened by 5.2% in April to $-47.6 billion from a March deficit revised from $-43.7 billion to $-45.3 billion. Exports declined by -0.3% to $191 billion, with notable export declines for autos, telecommunications equipment and pharmaceuticals. Increases in imports for cell phones, computers and computer accessories helped raise total imports by +0.8% to $238.6 billion.