Weekly Economic Trends and Indicators
The Headline:
On Friday, the Bureau of Labor Statistics (BLS) reported today that U.S. nonfarm payroll employment increased by 206,000 in June. Expectations were for an increase of about 200,000. For the third month in a row, the unemployment rate edged up by 0.1 percentage points to 4.1%. This puts the unemployment rate 0.5 percentage points higher than a year ago and at its highest level since November 2021.
Average hourly earnings were up 0.3% to $35.00 (up 3.9% over the last year), and the average workweek was unchanged for the second month in a row at 34.3.
The Details:
Sectors with the most job gains last month were health care and social assistance (82,400), government (70,000) and construction (27,000). Leisure and hospitality, which had been a leading sector during many of the preceding months, was essentially flat. Manufacturing was also essentially unchanged as it has been for several months. Temporary help services were down 48,900, which could be a sign of softening demand in the professional and business services category.
The BLS also revised payroll employment down for the last two months by 111,000 (57,000 in April and 54,000 in May). Many analysts expect that today’s number will be revised downward as well. It is not unusual for these numbers to be revised down when the market is near a turning point.
In a separate report released in June, payroll employment in the Quad Cities metro area stood at 181,400 which was down by 2,700 compared to a year ago.
The Context:
On the surface, the national payroll numbers look good. Anything over 200,000 is generally considered positive. However, there are enough mixed signals in the data to give policymakers some cause for concern about the labor market. Downward revisions, slower growth in the private sector, and a decline in temporary help all point to a weaker labor market.
Earlier last week, Fed Chair Jerome Powell spoke about the labor market saying, “It looks like it’s doing just what you would want it to do, which is to cool off over time.” By Friday afternoon, market sentiment was leaning toward a belief that this labor market report would give the Fed some cover for cutting the fed funds rate in September. The probability of a rate cut in September rose from 68.4% to 72.5% on Friday according to the CME FedWatch tool.
The Atlanta Fed’s GDPNow forecast for 2nd quarter GDP growth was also revised again last week, falling to 1.5% from 1.7%. If this turns out to be true, it would also lend support to a September rate cut with potentially another cut before the end of the year.
Next week: Inflation update
