Unemployment Insurance Weekly Claims
Initial claims were 243,000 for the week ending 7/13 (+20,000).
Insured unemployment was 1,867,000 for the week ending 7/6 (+20,000).https://t.co/ys7Eg5LKAW pic.twitter.com/lhVqSVtHL9
— U.S. Department of Labor (@USDOL) July 18, 2024
The latest U.S. employment report provides further evidence of a cooling economy, boosting expectations for the Federal Reserve to cut its benchmark interest rate in the coming months. The Bureau of Labor Statistics reported Friday that fewer jobs were added in June compared to the previous month, and the unemployment rate rose to its highest level since late 2021. Moreover, the jobs growth numbers for the prior two months were revised downward, suggesting that the Fed’s policy of high interest rates to curb economic activity and tame inflation is taking effect.
“Overall, the report is consistent with ongoing moderation in growth and inflation.
America's low-wage workers have seen 2 great periods of real wage growth in the past 45 years:
The Dot-Com era (1997 to 2007)
The hot economy era (2014 to 2024)The key point –>Tight labor markets *really* lift up struggling Americans.
Incredible chart from @ernietedeschi pic.twitter.com/xDmTQvJAOs
— Heather Long (@byHeatherLong) July 17, 2024
Job gains are still not slowing as fast as consensus expectations, but the underlying pace is cooling,” Nomura economists said in their report on Friday. Markets reacted to the latest data, with stocks and Treasury yields falling, spurred by optimism that the Federal Reserve could begin cutting its benchmark rate.
Global News | US: Latest jobless claims and continuing claims update👇 #jobs #employment pic.twitter.com/NoDjKF0AEr
— ET NOW (@ETNOWlive) July 18, 2024
Traders are now pricing in a 77% chance for a rate cut at the Federal Reserve’s September meeting, up from a 64% likelihood the previous week, as per the CME Group’s FedWatch tool. “The June jobs report adds to evidence from other recent growth indicators that the Fed is likely sufficiently restrictive,” Deutsche Bank economists commented.
Fed rate cut prospects rise
Global News | US June industrial production rises 0.6% MoM vs est of 0.3% pic.twitter.com/8M5meIVSa8
— ET NOW (@ETNOWlive) July 17, 2024
“These data therefore boost prospects for a September rate cut, though continued evidence of moderating inflation over the coming months is necessary.”
Fed officials, while acknowledging progress in combating inflation, have reiterated the need for more data confirming that price pressures are under control before making any policy changes. “We want to be more confident that inflation is moving sustainably down toward our 2% target before we start the process of easing policy,” Powell stated during a panel discussion in Portugal last week. The latest reading of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, indicated a slowdown to 2.6% year-over-year ending in May.
Fed Chair Powell is scheduled to address the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday, providing an overview of the economic conditions. Lawmakers are expected to question Powell on the impact of high interest rates on the economy and the timeline for potential rate cuts. Later in the week, the first official readings on June inflation will be released, offering more clarity on future rate decisions.
“In his comments last week, Powell reiterated points from the June FOMC meeting but noted that the disinflation trend appears to have resumed and that the policy stance is restrictive,” Deutsche Bank mentioned in its report. “Importantly, his testimony will come before the June CPI release, which will play a significant role in determining whether the Fed will cut rates before the upcoming election.”
The continuing adjustments and close monitoring of labor trends will be essential for the Fed, balancing its dual mandate to promote maximum employment while maintaining stable prices. Powell emphasized, “We have to balance the two, and given the strength in the economy, we can approach that carefully.”
With Powell’s testimony and June inflation data on the horizon, financial markets and policymakers closely watch for signals of the Fed’s next move in its monetary policy strategy.
