The blockbuster US jobs report released Friday showed the nonfarm payroll increased by 172,000 in May, almost double market expectations of 85,000. This reading signaled that the US labor market no longer relies solely on the healthcare sector to create new jobs, as local governments and the leisure and hospitality industry also added a significant number of jobs.

One popular theory for the surge in leisure and hospitality payroll is that hotels, bars and restaurants were starting to boost their manpower in preparation for the upcoming World Cup, which is co-hosted by the US, Canada and Mexico and will kick off this Thursday (June 11).

The 70,000 growth in the leisure and hospitality industry—which comprises businesses including accommodation, food services, performing arts and spectator sports—was exceptional; it was the strongest since Feb 2023, or since Sep 2019 if we exclude the pandemic period.

Actually, a similar job boom was also observed in the May jobs report for Canada, also published Friday. Statistics Canada has a different industry categorization compared to the BLS, so we have to look at two data series. Accommodation and food services saw a 17,000 increase in employment while the information, culture and recreation sector, which houses the spectator sports industry, also booked 19,000 new jobs.


Combined with the fact that employment growth was concentrated in Ontario and British Columbia, the only two provinces to co-host the World Cup, there are plenty of hints suggesting the once-every-four-year football tournament had a stimulating effect on the North American labor market.

The look-through question

The important question, however, is this: shouldn’t the central banks look through such a one-off, short-term employment boost?

The standard principle of look-through policy is based on the so-called long and variable lag of the monetary policy impact. Fed Governor Michelle Bowman recently explained that:

As I mentioned earlier, monetary policy actions take time to work their way through the economy. Therefore, looking through temporary inflation shocks may be appropriate to achieve optimal policy, as long as doing so does not affect our credibility to bring inflation back to 2 percent.

The same principle applies to labor shocks: if the entire World Cup employment boost is just short-term, should the market worry about the prospect that a rebounding jobs market will force the Fed to hike rates faster than previously expected?

The picture without the boost

One way to look at it is to exclude the leisure and hospitality employment boost from the overall nonfarm payroll figures.

As shown above, the ex-leisure & hospitality figure of 102,000 jobs still comfortably beats the market expectations of an 88,000 payroll increase. Moreover, the picture of three consecutive months of strong job creation is still intact. So, the argument that the Fed may have a more urgent need to increase interest rates in the face of Iran War-induced inflation still stands.

(Arguably, some of the payroll created by the local governments last month, which totaled 55,000 jobs, may also be related to the preparation for the World Cup. But it’s harder to get a clear picture there, so we can only speculate.)

Similarly, the May job market rebound in Canada was also broader than merely the World Cup-related industries.

Hence, even looking through the World Cup boost, the overall labor market picture remains largely unchanged. The US is enjoying a labor market re-acceleration while its northern neighbor is seeing initial signs of employment stabilizing.

Another month of very strong jobs report in the US: nonfarm payroll rose 172,000 in May, blowing past analysts’ expectations of 88,000. The three-month average is now 188,000 — exceptional given that not long ago the talk was about a “breakeven” rate (the job additions needed to hold unemployment steady) close to zero, if not negative.
Together with an unemployment rate of 4.3% (down from 4.33% in April to 4.30%), the US labor market is unmistakably reaccelerating.

Still, it was a surprise that Beth Hammack, president of the Cleveland Fed, posted on LinkedIn hours after the release that “today’s jobs report reaffirms that the labor market appears to be roughly in balance” and that she “believe[s] persistently high inflation is the bigger concern.” If recent inflationary trends continue, “it may soon be appropriate to act,” she concluded.

This is a hawkish call, and she made sure to put it out on the last day before the FOMC’s pre-meeting blackout.

Hammack was one of three FOMC members — along with Neel Kashkari (Minneapolis) and Lorie Logan (Dallas) — to dissent at the last FOMC meeting on the grounds that the statement contained an “easing bias.” Given this last-day post, it would not be surprising to see the same three dissent again on June 17, but this time on the lack of a “hiking bias.”

Are these the Forward Guidance you are looking for?

One reason it may not, though, is Warsh’s stated intention to end forward guidance.

As we’ve discussed before, the definition of forward guidance varies depending on who is using it and when. A neutral statement, for instance, can itself be a form of guidance — signaling that rates will remain unchanged near-term.

This brings us to a Yahoo Finance interview with New York Fed president John Williams earlier this week. When asked about the easing bias in the last FOMC statement, he agreed that the Fed should drop language signaling that its next move will be a rate cut.

“I don’t think forward guidance is particularly helpful right now in terms of trying to communicate monetary policy,” Williams said. “I don’t see an obvious argument that we should change interest rates, but I also don’t see an obvious kind of direction where we would go in the future.”

Williams here limits forward guidance to statements that point to the direction of the next move — saying the Fed prefers no change in rates does not, by this definition, count as guidance.

This may be close to how Warsh defines forward guidance. If he merely wants to eliminate guidance for future rate changes via the official statement and the dot plot, that is a task he can plausibly achieve.

That would mean forward guidance in the broader sense — Fed officials’ public communications of their preferred reaction functions to incoming data — would survive. And this week is a case in point.

These ain’t the Forward Guidance you are looking for

This week alone we have heard from Logan:

I am increasingly concerned that higher interest rates could be necessary later this year to fully restore price stability and appropriately balance both sides of the Fed’s dual mandate.

Last week, Governor Lisa Cook:

I currently believe that the right course of action is to hold rates steady. However...I am prepared to raise rates, if the expected disinflation does not appear in a timely manner.

And Governor Michelle Bowman, on the other side of the argument:

I appreciated and supported keeping the language from the March post-meeting statement about additional policy rate adjustments. It is appropriate to look through temporarily elevated inflation readings largely due to higher energy prices

It would be a loss if all of these “family fights” were kept behind closed doors and what we were left with were comments like Vice Chair Philip Jefferson’s from last week:

I have not prejudged the next meeting and look forward to engaging with my colleagues about the policy necessary to best achieve our dual-mandate goals.

Fed Governor Powell, who vowed to be a “low-profile” Fed governor in support of Chairman Warsh, made sure everyone still heard him in his first speech after handing over the chairmanship.

The speech was delivered upon his acceptance of the 2026 John F. Kennedy Profile in Courage Award. Worth noting that this year’s honour was shared with The People of the Twin Cities, Minnesota, “for risking their lives to protect their neighbors and immigrant community members from an unprecedented federal law enforcement operation” — a citation that carries a hardly subtle political connotation. This was the kind of venue Chairman Powell would have quietly avoided a year earlier. Not so, evidently, for Governor Powell.

The speech itself also did not pull punches. Powell closed by touching on two contentious subjects. (For comparison, his acceptance remarks for the Paul A. Volcker Public Integrity Award in March were genuinely “quiet.”)

The first was his emphasis that US presidents should refrain from attacking the Fed’s independence — or else:

If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well. The public would lose faith that the central bank will make decisions based only on what’s best for all Americans. The Fed’s credibility would be lost. That credibility enables the Fed to support a strong and stable economy for the benefit of American families and businesses. Our credibility has been built and sustained over many decades, and we have a duty to safeguard that priceless asset for our fellow citizens and for generations to come.

The second message was simpler: don’t you dare touch any Reserve Bank president.

Fed governors and Reserve Bank presidents hold office with legal protection against removal.

Administrations play no role in the selection or oversight of the 12 Reserve Bank presidents.

While the first point grabbed all the headlines, the second is the more significant of the two. It speaks directly to the next plausible front in the Trump administration’s pressure on the Fed: the so-called Fed Board Majority problem.

This is a relatively new talking point from Powell — that he aims to protect Reserve Bank leaders from being fired “at will” by the administration.

As we have previously discussed, the issue is controversial in the sense that it has never been tested and the law itself is not exactly clear. One view holds that the President cannot fire regional Fed presidents because the authority to do so sits with the Fed Board:

A 2019 legal opinion from the Department of Justice’s Office of Legal Counsel states that Fed Governors are likely “Principal Officers,” as they are directly appointed by the President, while regional Fed presidents are “Inferior Officers” to the Fed Board. This means the Board of Governors can likely dismiss Fed presidents “at will,” rather than “for cause.” They only have to provide a reason in writing, not necessarily a “legitimate cause.”

Both Powell and Waller had publicly discussed this in April. Governor Chris Waller, at an April Brookings event, was asked whether he would ever agree to consider firing Reserve Bank presidents because their views on interest rates differed from those of the administration. He answered:

Well, that’s not the design of the system. Period.

Powell, at the April FOMC press conference, concurred:

The other thing [Waller] touched on was the idea of removing reserve bank presidents from office over different views on monetary policy... That’s not something that I would support. Chris [Waller] said the same thing.

Without the two votes from Powell and Waller, the Fed Board majority is not on the Trump administration’s side — and the route to exerting control over interest rates by removing Reserve Bank presidents is not, for now, viable.

Powell’s repositioning is notable for bringing this argument into public view. The legal protection of Fed governors, which is expected to be reaffirmed by the Supreme Court through the Lisa Cook case, should also extend to regional Fed presidents. Powell won’t and can’t stay on the Board forever — his governor term runs until January 2028 — and when he leaves, Waller will be the one holding out against a majority that may be willing to try firing Reserve Bank presidents.

By raising this topic more openly, Powell can help encourage more Fed officials, and even Senators, to express their view that Reserve Bank presidents are “untouchable.” It seems to me this is the legacy project “quiet” Governor Powell has set for himself.

But at his last FOMC meeting as the Fed chair, a total of four officials voted no—Governor Stephen Miran dissented in favor of a 25-basis-point cut, while Reserve Bank Presidents Beth Hammack, Neel Kashkari, and Lorie Logan dissented because they opposed the inclusion of an easing bias in the statement.

What if I tell you the Fed officials actually disagreed more at times during the zero-against vote period than in the last meeting? This is what the FOMC Minutes-based Hidden Dissent Index indicates.

The FOMC Hidden Dissent Index, an indicator developed by Kwok Ping Tsang of Virginia Tech and Zichao Yang of Wenlan School of Business, measures the level of hidden dissent among Federal Open Market Committee members at each meeting, based on the words used in the meeting record rather than the recorded vote. The graph above shows the version computed from the FOMC meeting minutes.

Zooming in on the period after 2020, we can see the index peaked at the November 2022 meeting, when it breached the 0.28 level (the higher the reading, the more “hidden dissent”); the reading at the four-dissent April 2026 meeting: 0.23.

Actually, we can see that the index was elevated during the second half of 2022. Why?
Well, one major factor to consider is that the period was right in the middle of the Fed’s post-Covid rate hike cycle.

During that period, while all FOMC members knew the interest rate should go up further, they started to think about how fast and how much more they should hike— and that generated divergence in their views.

The November 2022 meeting was a particularly contentious one in the sense that the minutes described four distinct positions on the question of when to slow the pace of hikes.

• “A number of participants” saw room to slow.

• “A substantial majority” thought slowing would “likely soon be appropriate.”

• “A few” wanted to slow for financial-stability reasons.

• “A few other participants” wanted to wait until the stance was “more clearly in restrictive territory” first.

A simpler indicator is that there were 18 paragraphs in the “Participants’ Views on Current Conditions and the Economic Outlook” section of the Nov 2022 minutes; in the April 2026 minutes, there were “only” 12 paragraphs; and the average across all the meetings in between is 12.6 paragraphs. The debate was heated during the Nov 2022 meeting, even though they eventually voted unanimously.

Comparatively, the current FOMC can be described as uniformly puzzled by the uncertainties posed by several Trump policies—the labor market is in a “curious balance” due to the immigration crackdown, goods inflation has been pushed up by the new tariff regime, and the real economy has been hit by a fresh round of supply shocks from “the conflict in the Middle East” and “the increase in global energy prices.”

They may have different views about the future direction of the dual mandates, with some putting more weight on the upside inflation risk than others. But most of them are not confident about what will happen next — who can say when the war will end? So, even if they have diverging views, they agree on the “wait-and-see approach” as the preferred default.

And yet — unlike the unanimous Powell-era meetings of 2022 to 2024 — four of them still chose to put their names on the record. That’s the new pattern worth watching. The post-Covid hiking cycle delivered the kind of “vigorous family fight” inside the FOMC that new Fed Chair Kevin Warsh has said he is looking for. But now the curious point is why the FOMC members are more open to voting against the consensus, even when they agree with the policy decision.

What drives this desire to be heard? Is it a reaction to the White House’s legal and verbal attacks on the US central bank? More importantly, will this trend continue in the Warsh era? This is what I hope the Hidden Dissent Index can help us explore.

Federal Reserve governor Chris Waller on Friday cast serious doubt on the textbook look-through strategy to handle the Iran War-induced inflationary pressure — or what we fashionably called the “War? Sh~” strategy. And he is not the only central banker who has expressed reservations.

In normal times, central banks tend to ignore oil price surges. It is because oil price fluctuations—and the war that pushes them higher—tend to be short-lived. Given the long and variable lag of monetary policy impact, it is likely that when the rate hikes finally affect the real economy, the inflation problem has already gone away. War? Sh~. We don’t need to talk too much about it.

But Waller on Friday deployed a fancy term—Bayesian Learning—to illustrate his warning against ignoring the Iran War inflation episode. The concept is about how people will update their prediction given new information.

In this case, the observed inflation rate, which has been pushed above the 2% target by successive supply shocks for the last five years, is the information in question. The public so far believes that inflation will ultimately return to the target. But when the evidence keeps challenging their core belief, they will ultimately update their belief in accordance with observations.

“There must be some reason the inflation rate can’t be returned to 2% and it is foolish to trust that it will.” This updated belief will introduce higher inflation expectations and the unanchored expectation will lead to a vicious cycle, pushing the inflation even higher.

In fact, Waller is not alone in worrying about this situation. As early as September last year, Megan Greene, an external member of the Bank of England’s Monetary Policy Committee, gave a speech on why, as supply shocks become more frequent and severe, look through may no longer be the optimal strategy.

In a recent Odd Lots episode, Greene applied her argument to the Iran War-inflicted economy.

“[The Bank of England have] done a lot of research showing that households and businesses are possibly more attentive to inflation once inflation comes within a certain band... in the UK we think that if inflation is somewhere between 3 and 3.5%...So, if you then have another negative supply shock and inflation go up, people will be much more sensitive to that.”

This is a different angle on the same inflation expectation de-anchoring problem. People are getting more attentive to further price changes when the inflation rate is high, and they are more likely to revise their expectations.

The crux is that the Iran War is at least the fourth major supply shock since 2020 (Covid pandemic, Ukraine War and US tariffs) and the global economy was hit by consecutive rounds of cost push over the last five years. Can the central banks confidently believe that the public will not have second thoughts on whether the inflation targeting system is credible? And for how much longer? This is the defining challenge of monetary policy now.

The argument goes like this: three Biden-appointed governors — Philip Jefferson, Michael Barr, and Lisa Cook — remain on the Fed board. Together with Powell, they already form a four-vote majority on the seven-member board. If Waller defects to their side, that majority becomes a supermajority.

As Navarro stated:

“Warsh would have the title; Powell would control the reaction function.”

But consider when this framing will prove useful for Warsh and the Trump administration. If any future rate hike damages the economy — jobs, housing, growth, as Navarro’s headline warns — the blame can be neatly attributed to Powell’s shadow majority. Warsh doesn’t have to take any responsibility — he is just the victim of Powell’s shadow tyranny. It is intriguing to see how far this narrative will be developed prior to the next rate decision.

There is another strand in Navarro’s argument that is very noteworthy: He identifies Waller as the pivotal figure — the vote that would either defend or break Warsh’s position.

This is not really about rate decisions, as rate decisions are controlled by the FOMC, not the Fed board. Trump-friendly Fed officials are still outnumbered in the FOMC.

As we noted previously, the board majority may help the Trump administration solve the rate problem by using their real leverage: the board’s largely untested power to remove regional Fed presidents “at will”. A Waller “defection”, in this reading, would be the act that fully unlocks that threat even when Powell hands the governor seat to another Trump appointee.

Except Waller has already answered. At Brookings in April, he was direct: “[Using the board majority to fire Reserve Bank presidents] is not the design of the system. Period.” Powell endorsed the same view at his final press conference. The board majority gambit requires Waller’s cooperation — and Waller has already closed that door.

What Navarro’s piece does, then, is reopen the pressure campaign on Waller, this time with higher stakes. If Waller holds, Warsh’s Fed remains constrained. If he doesn’t, the architecture of Fed independence that Powell and Waller spent the spring defending starts to look a lot more fragile.

Reuters then reported, citing unnamed White House officials, that Trump will not only host the ceremony but will also swear Warsh in as Fed chair, breaking with some recent norm for the US central bank.

In the last few decades, a new Fed chair swearing-in was administered by a vice chair of the Fed in a ceremony held inside the Fed.

For example, Powell was sworn in by then-Vice Chairman of Supervision Randal K. Quarles in February 2018 in the Fed board room.

Janet Yellen’s swearing-in ceremony was held in the Federal Reserve building and the oath was administered by Fed governor Daniel K. Tarullo in February 2014, as Yellen herself was the Vice Chair and her ultimate replacement Stanley Fischer only took the role in June the same year.

Ben Bernanke was sworn in by then Vice Chairman Roger Ferguson in February 2006 at a ceremony hosted at the Federal Reserve building; President George W. Bush attended that event and gave a speech after Bernanke took his oath.

Nonetheless, White House swearing-in ceremony was not uncommon. In 1987, Alan Greenspan was sworn in at a White House event in the presence of President Ronald Reagan and the oath was administered by then Vice President George H.W. Bush.

For Paul Volcker, his August 1979 swearing in event was hosted by President Jimmy Carter at the East Room at the White House. His oath was administered by Judge Patrick Higginbotham, then a judge at the District Court for the Northern District of Texas.

The Federal Reserve chair nominee has repeated several times this message, like in the Senate Banking Committee hearing last month: “I don’t believe in forward guidance. I don’t believe that I should be previewing for you what a future decision might be. I think it’s essential that the Fed make decisions in the room.”

Forward guidance is one of the obvious targets of Warsh’s regime change to the US central bank. As Powell recently said, the Fed chair has the power to review the communication strategy, and every chair did that.

The FOMC Dissents Were About Forward Guidance

But if we look at the three dissent statements from the Reserve Bank Presidents who voted against the FOMC decision, we can see that forward guidance is not a thing that Fed officials will easily concede.

Neel Kashkari, Lorie Logan and Beth Hammack dissented in the last FOMC meeting not because of the decision to hold the rate unchanged, but due to the “easing bias” language that remained in the post-meeting statement.

The so-called “easing bias,” as they explained in their dissent explanations released on Friday, persists because the word “additional” remains in the sentence “In considering the extent and timing of additional adjustments to the target range for the federal funds rate...”

Say Less Is Also a Form of Forward Guidance

As Hammack explained: “This forward guidance was put into the statement to signal a pause rather than an end to the easing cycle.”

Kashkari concurred: “While that phrase is not a commitment to make further cuts to the policy rate, it is widely interpreted by Fed watchers to indicate the Committee’s expectation that the next adjustment to the federal funds rate would be a cut. I consider this language a form of forward guidance about the likely direction for monetary policy.”

Logan further illustrates their point: “When the FOMC gives forward guidance about the likely course of future interest rates, as in the recent post-meeting statement, that guidance is an important policy tool.”

The framing across all three explanations is consistent. On top of their common rejection of the language, all of them cited “forward guidance” as the reason they thought this issue was dissent-worthy.

Notably, during the press conference, Powell also brought up “forward guidance” when addressing this “easing bias” situation. When explaining why the “majority” of the FOMC preferred not to change the language, Powell explained: “These changes, it’s a form of forward guidance... you want to make them in a way that will be sustained and continue to make sense and not something you need to take back fairly quickly.”

The three dissent voters were saying that not changing the statement’s wording is a form of forward guidance; Powell said that, dropping the easing bias is also a form of forward guidance and they don’t want to do it lightly.

So, no matter what they choose to do, the decision itself is a form of forward guidance. This raises the question of how Warsh can ditch forward guidance and keep the decision in the meeting room.

Of course, Warsh’s “rejection” of forward guidance can be understood in a much more narrow sense—he is against the Fed using Summary of Economic Projections, commonly known as the dot plot, as a major communication tool; he is also against Fed officials, especially Reserve Bank presidents, making too many public speeches or media interviews.

These are subjects that are worthy of serious review, of course. As Powell himself said, “I was never the world’s biggest fan of the dot plot, but you can’t beat something with nothing.”

Nonetheless, Warsh’s messaging has been decrying forward guidance as a whole. This is untenable. As the Regional Fed presidents showed with their dissent, anything that can help the market speculate where the future interest rate will go, it is a form of forward guidance. An unchanged statement is forward guidance; one less word mentioned is also forward guidance.

Forward Guidance Is Not Merely a QE By-Product

Forward guidance is also not a by-product of quantitative easing; not necessarily. Economists recognize that the Fed adopted forward guidance since the early 2000s when the meeting statement started to include lines like “the Committee believes that policy accommodation can be maintained for a considerable period.”

In such a formulation, the central bank is communicating their expected reaction function to the market. “If A happens as we expected, then the Fed will move the interest rate this way.”

In recent years, such communications evolved further into the so-called central bank scenario analysis: the central bank tells you not only what they think they will do when A happens, but also their options when B, C or D happens.

Now, is this over-communications? Could be. For example, I found the Bank of England’s current scenario analysis method too long-winded and made my head spin. But does it make me want to cancel forward guidance? No, I just want the communication to be clearer and straightforward.

The Paradox of Cancelling Central Bank Communication

The paradox of cancelling central bank communications is that you will have to do a lot of communications about it. “Keeping the decision in the room,” doesn’t actually explain what you want to do. Saying less or saying nothing are also communications.

Let’s take the current economy as an example. The April Jobs report showed another month of strong payroll growth, pushing interest rate markets to price in an even higher chance of a hike.

But we also know one of the major factors President Trump used to pick Warsh is how likely he will push for rate cuts. So, there is a conflict. Communications can help smooth this potential conflict. Imagine Warsh magically pushed successfully for a rate cut while the market expects a hold, that could create unwanted volatility in the market. Is this what Warsh prefers?

In an interview with Financial Times’ Soumaya Keynes, Chicago Reserve Bank President Austan Goolsbee was asked about his view on Warsh’s reservations on communications, he said he shared some of Warsh’s skepticism.

“I have been a little skeptical of forward guidance in an environment that is not at the zero lower bound... I just think [the interest rate tool] is not binding, what’s the point... Who are we to try to put some binding constraints on future committees?”

This is the style of communications about central bank communications I would like to hear more of—explanation-based rather than gesturing and throwing politically pleasing buzz words around. When Warsh assumes the Fed chair position, he needs to seriously handle this paradox of communications.