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Here’s everything you need to know about Friday’s big jobs report

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People line up as they wait for the JobNewsUSA.com South Florida Job Fair to open at the Amerant Bank Arena on June 26, 2024, in Sunrise, Florida. 

Joe Raedle | Getty Images

The U.S. labor market may have cooled some in July, as a gradual slowdown in the economy and Hurricane Beryl are expected to have taken some of the steam out of hiring.

Still, even if the Labor Department’s nonfarm payrolls report for July, to be released Friday at 8:30 a.m. ET, does indicate a weaker jobs picture, the decline is expected to be only incremental and in keeping with the type of gentle downshift the Federal Reserve is looking to engineer.

“If the Fed was going to manufacture the soft landing, this is probably what it was going to look like,” said Mike Reynolds, vice president of investment strategy at Glenmede. “You’re seeing just modest on-the-margin weakness in the labor market that [isn’t likely to] spiral out of control into a negative feedback loop.”

Indeed, the report from the department’s Bureau of Labor Statistics is forecast to show payroll gains of 185,000 on the month, down from 206,000 in June, with the unemployment rate holding at 4.1%, according to the Dow Jones consensus estimate. Job reports for the past year and a half have routinely beaten the consensus.

But some economists think the report could be on the light side; Goldman Sachs expects Beryl, which ravaged large parts of Texas, particularly Houston, to pull down the jobs number by 15,000. The firm thinks the total payroll gain will be more like 165,000. Citigroup projects an even lower number — 150,000 on payrolls and a tick higher in the unemployment rate to 4.2%.

Should the unemployment rate keep climbing, it could raise fears that the so-called Sahm Rule is in danger of being triggered. The rule has observed without fail that when the unemployment rate over a three-month period averages half a percentage point higher than the 12-month low, the economy is in recession. A year ago, the jobless level as at 3.5% before it started climbing.

Optimism at the Fed

Job gains have averaged 203,000 a month for the first half of 2024, while the unemployment rate has drifted higher as more workers have come into the labor force and the level of those considered unemployed but looking for work or temporarily laid off has hit its highest level since October 2021.

Fed Chair Jerome Powell on Wednesday noted that the previous disparity between supply and demand in the labor market has come into near-balance. Open jobs now outnumber available workers just 1.2 to 1, down from 2 to 1 a few years ago as inflation roared.

Should the factors continue to come into balance and other inflation indicators show progress, Powell strongly hinted that an interest rate cut could be coming in September.

“Our confidence is growing, because we’re getting good data,” he said at a news conference following the Fed’s policy meeting. “Frankly, the softening in the labor market conditions gives you more confidence that the economy’s not overheating.”

Markets will be watching Friday’s numbers for confirmation that Powell’s view on the labor market is accurate — and that the Fed isn’t overconfident and waiting too long to start lowering rates.

There has been a growing chorus on Wall Street for the Fed to start easing now that most indicators show that the inflation rate is only a short distance from the central bank’s 2% goal. DoubleLine CEO Jeffrey Gundlach, for instance, told CNBC on Wednesday that he thinks the economy already is teetering on recession.

“When we look back at today, …. I kind of believe that we will say that we were in recession in September 2024,” he said.

Eyes on earnings

The Fed at its meeting voted to hold its benchmark overnight borrowing rate in a range of 5.25%-5.5%, where it has been for the past year.

Markets rallied on the news but gave back those gains Thursday following news that unemployment claims rose last week and the manufacturing sector slumped further into contraction.

“By holding off on cutting interest rates today, the Federal Open Market Committee is betting the labor market is strong enough to wait until the fall for confirmation that inflation is returning to 2%,” said Nick Bunker, Indeed Hiring Lab’s economic research director for North America. “Let’s hope it pays off.”

As always, markets also will have eyes on the average hourly earnings portion of the report for signs of underlying inflation.

The forecast is that earnings rose 0.3% on the month and 3.7% from year ago. If the latter is correct, it will represent the lowest earnings increase since May 2021.

“Even if wage pressures were to unexpectedly remain ‘stuck’ or slightly re-accelerate in this report, we think that the progress the Fed has made on inflation thus far means that there should still be an opportunity for the Fed to cut rates in September so long as subsequent data releases (eg July CPI) cooperates,” said BeiChen Lin, investment strategist at Russell Investments.

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Economics

Consumer sentiment worsens as inflation fears grow, University of Michigan survey shows

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A shopper pays with a credit card at the farmer’s market in San Francisco, California, US, on Thursday, March 27, 2025. 

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The deterioration in consumer sentiment was even worse than anticipated in March as worries over inflation intensified, according to a University of Michigan survey released Friday.

The final version of the university’s closely watched Survey of Consumers showed a reading of 57.0 for the month, down 11.9% from February and 28.2% from a year ago. Economists surveyed by Dow Jones had been expecting 57.9, which was the mid-month level.

It was the third consecutive decrease and stretched across party lines and income groups, survey director Joanne Hsu said.

“Consumers continue to worry about the potential for pain amid ongoing economic policy developments,” she said.

In addition to worries about the current state of affairs, the survey’s index of consumer expectations tumbled to 52.6, down 17.8% from a month ago and 32% for the same period in 2024.

Inflation fears drove much of the downturn. Respondents expect inflation a year from now to run at a 5% rate, up 0.1 percentage point from the mid-month reading and a 0.7 percentage point acceleration from February. At the five-year horizon, the outlook now is for 4.1%, the first time the survey has had a reading above 4% since February 1993.

Economists worry that President Donald Trump’s tariff plans will spur more inflation, possibly curtailing the Federal Reserve from further interest rate cuts.

The report came the same day that the Commerce Department said the core inflation rate increased to 2.8% in February, after a 0.4% monthly gain that was the biggest move since January 2024.

The latest results also reflect worries over the labor market, with the level of consumers expecting the unemployment rate to rise at the highest level since 2009.

Stocks took a hit after the university’s survey was released, with the Dow Jones Industrial Average trading more than 500 points lower.

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Economics

PCE inflation February 2025:

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Core inflation in February hits 2.8%, hotter than expected; spending increases 0.4%

The Federal Reserve’s key inflation measure rose more than expected in February while consumer spending also posted a smaller than projected increase, the Commerce Department reported Friday.

The core personal consumption expenditures price index showed a 0.4% increase for the month, putting the 12-month inflation rate at 2.8%. Economists surveyed by Dow Jones had been looking for respective numbers of 0.3% and and 2.7%.

Core inflation excludes volatile food and energy prices and is generally considered a better indicator of long-term inflation trends.

In the all-items measure, the price index rose 0.3% on the month and 2.5% from a year ago, both in line with forecasts.

At the same time, the Bureau of Economic Analysis report showed that consumer spending accelerated 0.4% for the month, below the 0.5% forecast. That came as personal income posted a 0.8% rise, against the estimate for 0.4%.

Stock market futures moved lower following the release as did Treasury yields.

Federal Reserve officials focus on the PCE inflation reading as they consider it a broader measure that also adjusts for changes in consumer behavior and places less of an emphasis on housing than the Labor Department’s consumer price index. Shelter costs have been one of the stickier elements of inflation and rose 0.3% in the PCE measure.

“It looks like a ‘wait-and-see’ Fed still has more waiting to do,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Today’s higher-than-expected inflation reading wasn’t exceptionally hot, but it isn’t going to speed up the Fed’s timeline for cutting interest rates, especially given the uncertainty surrounding tariffs.”

Good prices increased 0.2%, led by recreational goods and vehicles, which increased 0.5%. Gasoline offset some of the increase, with the category falling by 0.8%. Services prices were up 0.4%.

The report comes with markets on edge that President Donald Trump’s tariff intentions will aggravate inflation at a time when the data was making slow but steady progress back to the Fed’s 2% goal.

After cutting rates a full percentage point in 2024, the central bank has been on hold this year, with officials of late expressing concern over the impact the import duties will have on prices. Economists tends to consider tariffs as one-off events that don’t feed through to longer-lasting inflation pressures, but the encompassing scope of Trump’s tariffs and the potential for an aggressive global trade war are changing the stakes.

Correction: Consumer spending increased 0.4% in February. An earlier headline misstated the number.

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