August 03, 2024
✅️NFP
Non-Farm Payrolls increased by 114.000 in July, which is much lower than in two previous months: 179.000 in June and 216.000 in May. 3-month moving average, however, has not showed any downward acceleration, barely inching higher to 169.67 in July from 167.67 in June (see Chart). Starting from October 2022 the number of new monthly jobs decreased to an average of 200.000 from 350.000 in 2022 and 2021 as the result of policy tightening. Starting in March 2024 it continued to decline further – to around 170.000 at the moment (see Chart). Today’s reading demonstrates that the gauge is remaining at record low levels, which is a positive sign for Fed to start policy easing. Businesses take their time adding new jobs as they are uncertain about consumer demand because of expensive credit. This has in its turn disinflationary effect as consumers’ incomes decline as the result, leaving less cash in their pockets to spend on goods and services
✅️Unemployment
Unemployment rate has surged to 4.3% in July from 4.1% in June. This is a noticeable acceleration from June showing labor market cools rather rapidly (see Chart). This also has potential for price pressure subsiding as unemployed people will be forced to reduce their spending.
✅️Earnings
Average hourly earnings increased by 0.2% in July on month-to-month basis from 0.3% rise in June and 0.4% rise in May, which is again quite a positive signal for Fed’s plans to cut rates on the next meeting. On year-to year basis the gauge increased by 3.6% in July – rather sharp drop from 3.8% in June (see Chart).
✅️Rates
Taking into account strong disinflationary effect of today’s report the September hike is almost guaranteed with Fed Watch tool now showing 78% likelihood of such outcome. At the same time some economists started to call for even bolder actions from the Fed arguing that 50 basis point would be a right move to reduce the risks of recession looming as the result of tight policy.