According to the latest jobs report for June, the US economy is showing signs of a strong recovery and achieving a soft landing. The economy added more jobs than expected, slightly increasing the unemployment rate to 4.1% from 4.0% in May. This suggests more Americans are looking for work, even as wages moderated.
Inflation has also started to moderate over the year, with the Consumer Price Index showing a year-over-year increase of 3.2% in May, down from 3.4% in April. The continuation of a strong but slowing jobs market indicates that the Federal Reserve has managed to combat inflation without causing a severe economic downturn. The Federal Open Market Committee’s most recent meeting in June suggested just one interest rate cut for 2024.
However, Fed Chair Jerome Powell mentioned that if economic conditions continue to improve, a rate cut in September is “plausible.”
CME FedWatch estimates market assessments of the probability of interest rate cuts and indicates a 93% chance interest rates will remain steady in July and a 72% chance rates will be cut by September.
Economic optimism amid job growth
Some economists, such as Jan Hatzius, Goldman Sachs’ chief economist, believe the latest data should give the Fed the confidence to act.
Hatzius stated in a recent CNBC interview that the jobs report “reassures Fed officials that the labor market has continued to rebalance” and supports the likelihood of a rate cut in September. The Bay Area also experienced job gains in June, primarily due to an upswing in the East Bay, offset by employment losses in the tech-dependent South Bay and San Francisco. Employers added 2,200 jobs in the Bay Area in June, according to a report released Friday by the U.S. Bureau of Labor Statistics.
Despite the downturn in the San Francisco tech sector, the Bay Area’s overall job market is starting to show signs of an upswing. Scott Anderson, chief U.S. economist with BMO Capital Markets, noted that “Bay Area job growth kicked into a higher gear in the second quarter after an uneven performance in the first quarter. The economic gloom across the state and even the Bay Area is beginning to lift.”
Experts warn that the job market may remain rocky through the rest of 2024.
However, if inflation continues to cool, allowing for lower interest rates from the Federal Reserve, next year could see a brighter employment picture.
