US jobs report to show slowing contraction

US jobs report to show slowing contraction
US jobs report to show slowing contraction

Bloomberg — Analysts expect the monthly U.S. jobs report to show slowing hiring in June along with moderating wage growth.

Read also: Difficulty finding work in the US: unemployment benefit applications increase

Payrolls likely rose by 190,000 last monthaccording to the median estimate in a Bloomberg survey. Average hourly earnings likely rose 3.9% from a year earlier, the lowest in three years, in a report due out Friday by the Bureau of Labor Statistics.

The unemployment rate is expected to remain at 4%the highest level in more than two years.

This gradual cooling of the labor market would support Federal Reserve policymakers seeking multiple interest rate cuts this year. Investors are currently looking at the The likelihood that Federal Open Market Committee officials will cut rates when they meet in September and December, according to futures.

“The payrolls headline may suggest the Fed can be patient about cutting rates, but the recent rise in the unemployment rate signals more urgency,” Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou wrote in a preview of Friday’s release.

“We believe the Fed will have enough evidence by the September FOMC meeting to begin cutting rates,” the economists said.

Here’s what to look for in the key components of the report:

Nonfarm payrolls

The employment report is made up of two surveys: one of businesses, which determines payroll figures, and another of households, which is used to calculate the unemployment rate. Both have been very divergent this year, with the Business survey painting a much rosier picture of labor demand.

Many Federal Reserve officials have emphasized the surprising strength of nonfarm payrolls so far this year. A hiring figure below 200,000 would put the figure more in line with what the data has shown recently. from the household survey.

May’s surprise 272,000 increase reflected gains across all industries, with a BLS-compiled diffusion index that tracks the breadth of hiring jumping to the highest level since January 2023. A payrolls figure closer to the consensus estimate for June would likely push breadth back to levels that have prevailed for much of the past year.

Earnings per hour

Analysts expect average hourly earnings to rise 0.3% in June, following a surprise 0.4% increase in May. This would put the average hourly earnings rate at 1.7%. year-on-year variation below 4% for the first time since 2021 and would increase confidence that inflation will continue to slow.

Active population

Economists expect the report to show unemployment remained unchanged at 4% and labor force participation rose to 62.6%, reversing May’s decline. The May decline was concentrated among people aged 20 to 24 and those aged 55 or older.So-called “prime working age” participation, which denotes the 25-54 age group, rose in May to the highest level since 2002.

“The weak May household survey results were driven almost entirely by an implausibly massive drop in employment in the 20-24 age group,” said Stephen Stanley, chief U.S. economist at Santander Capital Markets, in a July 3 note. “I expect the May anomalies to unravel in June, leading to a sizable rebound in the employment measure.”


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