Source: Wall Street See
Author: Zhao Ying
Economists predict that the number of initial jobless claims for the week ending June 29 may slightly increase from 233,000 the previous week to 235,000, and this potential upward trend may indicate a cooling job market.
As the Federal Reserve weighs when to cut interest rates, whether the job market is cooling down has become a key issue. The data this week may reveal clues, with unemployment benefit applications to be released on Wednesday evening and non-farm payrolls to be released on Friday.
The U.S. Department of Labor will release the number of people who applied for unemployment benefits last week at 8:30 pm tonight. Economists surveyed by FactSet predict that the number of new applications for unemployment benefits may have risen slightly from 233,000 the previous week to 235,000 as of June 29. This potential upward trend may indicate that the job market is cooling down.
Tracking the number of people who apply for unemployment insurance each week can timely reflect changes in the job market. If this data continues to rise, it may mean that layoffs are increasing or recruitment is slowing down, which will have an impact on the overall economy.
Currently, the market is concerned whether US employment will sharply deteriorate, leading the economy into a recession.
This week's employment data is crucial for the Fed's decision-making. The Fed is seeking solid evidence that inflation is falling back towards its 2% target before considering a rate cut. A weak job market will curb demand for goods and services, helping the Fed control inflation.
Data released on Tuesday showed that the number of job vacancies in May exceeded economists' expectations, which seems to contradict the expectation of a cooling labor market. This complex employment situation has increased the difficulty of the Fed's decision-making.
The most important employment report of this week is the non-farm payrolls for June. The market currently expects employment growth to plummet to 188,000 in June, with the unemployment rate holding steady at 4% and the monthly wage growth rate dropping slightly to 0.3%.
It is worth mentioning that the unemployment rate has risen from its historical low of 3.4% a year ago to 4% in May, which is close to the full employment level that economists believe. Historically, once the unemployment rate has risen half a percentage point from its recent lows in the past year, it will continue to rise sharply and the economy will fall into a recession.
Nick Timiraos, the financial reporter known as the "new Federal Reserve news agency," has warned that even if the labor market cools down slowly, the U.S. economy may still fall into a recession.
LPL Financial's chief economist Jeffrey Roach believes that:
The reduction of high-paying positions is a sign of early cooling in the labor market. As long as the job market remains stable, consumers will maintain a certain level of purchasing power, and the argument for a soft landing still seems to hold.
However, if the labor market remains strong, the Fed will face greater challenges in its efforts to lower the inflation rate to its 2% target.
Editor/Jeffy