In his latest Macro Roadmap note (available to pro subscribers), Goldman trader Cosimo Codacci-Pisanelli wrote that "the path to a near-term Fed cut is more likely to come via a deterioration of the US labor market rather than from the inflation side of the mandate." He is not the only one who thinks that: none other than Fed Chair Powell himself agrees. Asked after the May 1 FOMC decision what factors might lead officials to cut rates earlier than planned, Powell cited an “unexpected” deterioration in the labor market, even though he saw little chance of that.

But after today's unexpectedly ugly JOLTS and last month's dismal nonfarm payrolls report, just such a surprise is in store, and there is a very specific reason for that.

While various Fed officials have gone on the record in recent days claiming that the labor market is still tight, readers may recall that back in March we warned that US payrolls had been overestimated by at least 800,000 (as calculated by the Philadelphia Fed).