Source: Jin10 Data
Economists debate: Is the US labor market normalizing, or is it an indication that the economy is about to slow down?
The US non-farm payroll report for June, which is scheduled to be released on Friday, is expected to be the latest data confirming the slowing US labor market. According to foreign media estimates, non-farm payroll employment is expected to increase by 0.19 million people in June, while the unemployment rate will remain at 4%.
In May, the US unexpectedly added 0.272 million jobs, while the unemployment rate unexpectedly rose to 4%. The focus of the market for the latest non-farm payroll report and data for the entire second half of the year may be whether the slowdown in monthly employment growth reflects normalizing labor markets or early signs of broader economic slowdown. Currently, economists believe that Friday's data is more likely to be the former.
Michael Gapen, the US economist at Bank of America, believes in a weekly research report that the report may show a "cool but not frozen" labor market.
Fed Chairman Powell said that due to a series of weaker-than-expected economic data, including inflation data, the US is headed for a "path of anti-inflation."
Before Friday's employment report was released, investors were digesting expectations that the Fed would cut rates twice this year, with the first rate cut most likely in September.
According to the CME Group's FedWatch tool, investors expect a close to 73% chance of a rate cut in September. Last month, the Fed's forecast indicated that one rate cut this year might be appropriate.
Before the Friday report, this week's labor market data showed more signs of slowing down.
On Wednesday, the so-called small non-farm ADP data showed that the private sector added 0.15 million jobs in June, lower than the 0.157 million jobs added in May.
At the same time, data from the US Department of Labor showed that nearly 1.86 million people continued to apply for unemployment benefits in the week ended June 29, higher than the 1.83 million people last week, rising for the ninth consecutive week.
With the increase in unemployment benefits applications, the unemployment rate reached its highest level in more than two years. Wells Fargo Chief Economist Sarah House and other economists pointed out that the main concern at present is that the labor market will continue to slow down and be weaker than before the COVID-19 pandemic.
House wrote in a report to clients, "Given the marked cooling of the labor market over the past year, we believe further weakening of the labor market will become more of a concern and less welcome by the Fed."
However, other data released this week reflects some resilience in the labor market.
New data from the US Bureau of Labor Statistics on Tuesday showed that as of the end of May, the US had 8.14 million job vacancies, up from 7.92 million in April.
The Job Openings and Labor Turnover Survey (JOLTS), which is considered an indicator of how confident workers are in the labor market, also showed that the resignation rate remained steady at 2.2%, close to pre-COVID-19 levels. In addition, the ratio of job vacancies to unemployed workers remained at 1.2, almost consistent with the average level in 2019.
House pointed out that the May JOLTS report showed that in many ways, the labor market "looks like pre-COVID-19," but the speed is more worthy of caution than alarms.
Currently, Powell believes that the labor market is still cooling at a rate that satisfies the Fed. Powell said at a meeting of the European Central Bank on Tuesday that the labor market did not cool too quickly, suddenly or drastically. Instead, Powell said, "Labor market data is what we want to see and what we have been seeing."
Editor / jayden