AAIG'S MACRO PULSE #13
Written by Jochem Verzijl
Welcome to this thirteenth edition of AAIG’s Macro Pulse. The week opened with the MOU close to signing, and ended with Iran firing ballistic missiles at Israel for the first time since the April ceasefire. The May jobs report came in well above expectations, but the composition tells a more cautious story than the headline. Oil is back hovering around $90 on renewed conflict, and the deal that looked imminent a week ago is now visibly under strain. Let’s work through it!
1) KEY METRICS / DATA POINTS
Friday June 5 delivered a hot jobs report. The US economy added 172,000 jobs in May, well above forecasts of 85,000, with the unemployment rate unchanged at 4.3%. March payrolls were revised up by 29,000 to 214,000 and April up by 64,000 to 179,000, leaving the two months a combined 93,000 higher than previously reported. May job gains came from leisure and hospitality (70,000, mainly food services and drinking places), local government (55,000), health care (35,000), and manufacturing (7,000). Average hourly earnings rose 0.3% on the month and 3.4% from a year earlier.
The headline reads strong, but the composition is narrow. Most of the hiring came from two sectors, and the wage growth is still running below the 3.8% PCE inflation rate, meaning real wages remain negative. The share of unemployed who cannot find their way back to work has climbed to a cycle high of 27.5%, suggesting a low-hire, low-fire labour market wearing a steady unemployment rate as a disguise. The 4.3% unemployment figure has now held for the fourth straight month, but the time it takes the average jobseeker to find work is lengthening. That tells a different story than the topline number implies.
On the diplomatic front, the week began with the MOU close to signing. The draft includes a 60-day ceasefire extension during which the Strait of Hormuz would be open with no tolls and Iran would clear the mines it deployed, in exchange for the US lifting its blockade on Iranian ports and issuing sanctions waivers to allow Iran to sell oil freely. The US official noted Trump’s key principle in the agreement is “relief for performance,” meaning sanctions and frozen funds would only be released as part of a final agreement that is verifiably implemented. Pakistan’s Army Chief Field Marshal Asim Munir visited Iran late in the week, and a senior Iranian delegation including parliamentary speaker Ghalibaf travelled to Qatar to discuss the MOU and the unfreezing of more than $6 billion in Iranian assets held there.
Then on Sunday June 7, the situation broke down. Israel struck Beirut’s southern suburbs without warning earlier in the day, in defiance of Washington’s request to stand down. Iran responded by launching missiles at Israel in the first such bombardment since the April ceasefire took effect. Iran’s Revolutionary Guard stated in writing that the ceasefire “was conditional on a cease-fire on all fronts,” and that the operation was a warning, with broader responses to follow if aggressions are repeated. A White House official, granted anonymity, told MS NOW that “the recent negotiations with Iran in many ways have exposed a fundamental miscalculation from Trump and the White House,” and that Iran’s erratic behaviour has placed the president in a challenging situation with no imminent off-ramp.
Markets responded as expected. WTI crude futures climbed above $93 per barrel on Monday June 8, rebounding from two consecutive sessions of losses, as Iran launched multiple rounds of missiles toward Israel. Brent crude rose 1.65% to $94.63, with WTI up 0.86% at $91.32, after briefly retreating toward the $90 level. Analysts now view a Strait of Hormuz reopening in June as unlikely, with negotiations stalled and supply shortages continuing.
OPEC+ also approved another increase in July production quotas of 188,000 barrels per day despite persistent supply risks from the Middle East, an attempt to put downward pressure on prices that has been largely overshadowed by the renewed strikes.
2) AAIG’S PERSPECTIVE
The deal coming apart this week was not a surprise so much as a confirmation. The structural problem has been visible from the start. The framework treats Israel as a peripheral actor when Israel is actually central to whether the agreement can hold. Israel is not party to the US-Iran ceasefire and has continued to strike Hezbollah throughout. Iran has consistently signalled that its restraint on Hormuz and on missile launches is conditional on Lebanon being included in the broader settlement. The US has not been able or willing to force Netanyahu to stand down. That tension was always going to break at some point, and Sunday was the point.
Whether the MOU survives this week depends on how seriously both sides treat the missile exchange. Trump’s framing on Sunday, that the missile attacks are “certainly not going to help negotiations” and that he wants both sides to seek an “immediate ceasefire,” reads as someone trying to keep the deal alive rather than someone walking away. Iran’s Revolutionary Guard explicitly framed the strikes as a warning rather than the start of a renewed war. Both sides appear to want the diplomatic process to continue, but the anonymous White House official’s comment about a “fundamental miscalculation” is the more honest assessment of where this stands. The US underestimated how much leverage Iran retains, particularly through Hezbollah and the broader proxy network, and is now negotiating from a weaker position than it expected.
The jobs report is the more interesting domestic story this week, and the surface-level read is misleading. A 172,000 print with 93,000 of upward revisions looks like genuine strength. The substance is more cautious. The hiring is concentrated in two sectors, finance is shedding workers, and the duration of unemployment is rising while the rate itself stays flat. The labour market is entering a holding pattern. Companies are not firing aggressively, but they are also not hiring outside of a few specific sectors with structural demand (health care, hospitality, local government). The conditions for a labour market crack are building beneath the surface even as the topline number suggests stability.
The headline strength is good news for Warsh. This print lands 11 days before his first FOMC meeting on June 16-17, with markets pricing roughly a 65% chance of a hold, and the headline gives him cover to stay put even though the underlying hiring was narrow. What the strong jobs print also does is delay the moment when the Fed has to confront the soft data underneath. The longer the labour market looks fine on paper, the longer the committee can maintain the easing bias without removing it. That suits Warsh in his first meeting. It does not change the underlying dynamic that consumer spending is being funded by depleting savings, real wages are negative, and the duration of unemployment is lengthening.
On oil, the renewed strikes have reset expectations sharply. The market spent May pricing a deal that would deliver the strait reopening by late June or early July. Fitch and others have now pushed that timeline back, and the curve is reflecting it. The constructive interpretation is that Sunday’s exchange was a controlled escalation that both sides used to make their negotiating positions clearer, and that the MOU still gets signed within two to three weeks. The cautious interpretation is that the underlying impasse on Lebanon and the nuclear question cannot be resolved within the political timeframe both governments are working with, and that we are watching a slower return to fuller hostilities rather than a path toward resolution. Both readings have evidence supporting them right now. The next two weeks will tell us which is closer to the truth.
Underneath all of this, the inflation pipeline that has built up over the past three months continues to flow through to consumer prices. The May CPI release on Tuesday June 10 is the next hard print, and will be the last major data point before Warsh’s first meeting. If core CPI accelerates on the month, the gap between the strong jobs print and the inflation reality becomes harder to bridge, and the case for the Fed to remove the easing bias gets stronger. If it moderates, Warsh has more room to hold a measured line.
3) WHAT TO WATCH
Three things will shape the next two weeks.
The first is the May CPI release on Tuesday June 10. This is the most important domestic data point of the next two weeks. A monthly core reading above 0.3% would put real pressure on the FOMC, particularly given that the strong jobs print has already removed the case for cuts. If headline CPI accelerates from the 3.3% April level, it becomes harder for Warsh to maintain the easing bias in his first statement. The most likely outcome is a slightly softer monthly reading on energy moderation but a still-sticky core, which gives Warsh enough cover to hold but not to soften.
The second is whether the MOU gets back on track within two weeks. Trump and Iran both signalled on Sunday that they want negotiations to continue, but the next missile exchange or Israeli strike on Lebanon could shift that calculus quickly. The specific tell will be whether Pakistan’s mediation effort is reactivated formally, and whether the Qatar-held Iranian funds discussion resumes. If those processes are restarted, the deal is still alive. If they go quiet, this week’s missile exchange becomes the start of something larger rather than a one-off escalation.
The third is the June 16-17 FOMC meeting, which is Warsh’s first as chair and a projections meeting. The updated dot plot will be the most consequential signal of the entire month. If the median dot eliminates the one projected cut for 2026, markets will reprice. If the easing bias stays in the statement, the question becomes whether Warsh’s press conference framing aligns with it or undercuts it. The strong jobs print gives him the option to hold a hawkish line without forcing a hike, which is probably his best path through a meeting where the data is genuinely mixed.
The thread running through this week is that nothing here is settled. The deal is closer than it has been but is not signed. The labour market looks fine on the surface but is softening underneath. Inflation is moderating in monthly terms but still elevated. Oil is range-bound between deal optimism and renewed conflict. Each of these variables can move sharply on a single event, and the next two weeks contain at least three events that could trigger meaningful repricing: the CPI print, the FOMC meeting, and whatever happens next between Iran and Israel. The most useful posture is to take none of the current narratives at face value and to watch how the data evolves before drawing conclusions.
Thanks for reading this 13th pulse, and see you at the next one!
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