Interactive Brokers Senior Economist José Torres joins Yahoo Finance Live to discuss the May jobs report, inflation growth, labor market weakness, and the outlook for commodities.

Video Transcript

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JULIE HYMAN: The last week's May jobs report showed an increase of 390,000 non-farm payrolls added. Our next guest, though, says we might have seen the highest monthly job gain for the remainder of this year. For more, let's welcome Interactive Brokers, Senior Economist, Jose Torres. Jose, thank you for being here. So as we look at the economic trajectory from here, most of the attention, of course, has also been focused on inflation and whether we have seen the worst of it in terms of the inflation growth that we have been seeing. So, as you look at those two and how they work in tandem, if you will, do you think we've seen inflation peak also?

JOSE TORRES: Good morning, Julie, and thanks for having me inflation peaking largely depends on geopolitical conflicts, Russia and China. China with the supply chain, Russia with commodities. The outlook for commodities is that they're stubbornly high currently, but the outlook is that they will continue going higher.

Alongside that backdrop, a consumer slowdown is occurring due to fading savings, generationally high inflation, and drops in asset prices. On the corporate side, margin compression is likely due to slowing consumer, stubbornly high and rising commodity costs, and geopolitical risks, like I said earlier.

So I think that it's a margin compression story on the corporate side and we've already seen small business be incredibly weak. And I think that the weakness in small business as the Fed continues to tighten, that weakness is going to transition into large corporates as well. So I think that was probably the peak for job gains in 2022.

BRIAN SOZZI: Jose, is high inflation here to stay?

JOSE TORRES: Yes. I think that we are in a paradigm shift, Brian. Central banks no longer benefit from cost effective integrated supply chains. The global outlook is, unfortunately, not positive now. If the global situation becomes peaceful and China and Russia want to work with the West more, then we can have those cost effective integrated supply chains. And then the commodity complex can work a lot better. But right now, the outlook is negative for that. So I do think inflation is here to stay. And if you look at the CPI inflation and the Federal funds rate, there's a big spread there. We're a long way from neutral. So I do think inflation is here to stay.

- Who are the companies, the sectors that you're watching that are best equipped to continue to navigate the current supply chain crisis?