Economists say that US numbers may show some weakness
Economists surveyed by Dow Jones expect June nonfarm payrolls in the Untied States to show growth of 200,000, down from 272,000 reported for May. The report is to be released on Friday, 8:30 a.m. ET. The signs all point to the labor market slowing down or a broader economic weakness down the road.
“This is a report that’s coming at a point where there’s a little more uncertainty about the economic landscape than there has been in a few months,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “Specifically, I’m thinking more about the unemployment rate, which has been slowly trending up.”
Jobless levels in May went up 4%, which is usually a cause for celebration. However, the underlying issue is where the rate is now compared to the past year.
The May rate was 0.5 percentage points above its 12-month low of 3.5% in July 2023, which may trigger a recession indicator called the Sahm Rule. The rule has consistently shown that the economy is in recession when the unemployment rate on a three-month average surpasses its 12-month low by half a percentage point.
“If the unemployment rate does what it’s been doing for the last bit of time here where it’s very slowly rising, I don’t think that means we’re at a very high risk of triggering a Sahm Rule or any sort of unemployment rate-based measure of entering recession,” Bunker said. “That being said, the probability of that happening has risen, even if it’s not the most likely outcome right now.”
Gross domestic product rose at a 1.4% annualized pace, highlighting the economy has slowed down in the first half of 2024. Meanwhile, the Atlanta Federal Reserve tracks a 1.5% growth in the second quarter.
Lingering inflation concerns may also keep the Fed on the sidelines longer in terms of lowering interest rates. Market participants and economists will also keep an eye out for other key metrics.
Another area of concern has been the separation between the nonfarm payrolls count, as taken from establishments that participated in the Bureau of Labor Statistics’ survey, against the household count of people reporting that they’re holding jobs.
The survey shows payrolls increasing by about 2.9 million over the past 12 months. On the other hand, the household count that calculates the unemployment rate is up by just 376,000. Experts consider the establishment survey to be more reliable, but the disparity is raising eyebrows.
Attention will be given to hours worked and average hourly earnings as a way to gauge inflation.
The forecast is for a monthly paycheck gain of 0.3% and a 12-month increase of 3.9%. At this rate, this will be the first time the annual increase is below 4% since June 2021.
