Friday’s Jobs Report Expected to Show Slowing Payroll Gains as Concern Rises About Broader Economy

With signs that the labour market is at least slowing, if not something worse, the June nonfarm payrolls report takes on added significance. Payroll gains so far in 2024 have totalled 1.24 million, down about 50,000 a month below the same period a year ago.
In historical terms, the pace of job gains is still solid. However, there are signs bubbling underneath that conditions could be getting softer and possibly pointing at 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.
The jobless level in May did nudge higher to 4%, the first time it hit that threshold since January 2022, up from 3.7% a year ago. The forecast is for the rate to hold there. Under normal circumstances, a 4% unemployment rate would be cause for celebration, not concern. However, what is catching the eye of some economists is where the rate is now compared with where it’s been over the past year.
The May rate was 0.5 percentage points above its 12-month low of 3.5% in July 2023, potentially triggering a recession indicator called the Sahm Rule. The rule has shown consistently that whenever the unemployment rate on a three-month average eclipses its 12-month low by half a percentage point, the economy is in recession. While there are scant data signs that a recession is at hand, the trend in unemployment is generating some attention.
There are also lingering inflation concerns that could keep the Fed on the sidelines for a while longer in terms of lowering interest rates. One other area of concern has been the divergence between the nonfarm payrolls count, as taken from establishments participating in the Bureau of Labor Statistics survey, against the household count of people reporting that they’re holding jobs.

(Source: Reuters)