In June, US employers likely tempered their hiring efforts, and wage growth moderated, signalling a positive development for Jerome Powell and his Federal Reserve colleagues who are seeking further confirmation that inflation is slowing. This moderation in employment and wages could be a crucial indicator for the Fed’s future monetary policies via US News on TollNews.

Payrolls and Unemployment Rate

According to a Bloomberg survey of economists, payrolls in the world’s largest economy are projected to have increased by about 190,000 in June. This is a notable step down from the surprisingly robust 272,000 gain in May. The jobless rate is expected to hold steady at 4 percent, indicating a stable yet cooling labor market.

Wage Growth

Average hourly earnings are projected to have climbed by 3.9 percent from June of last year. This represents the smallest annual advance in three years, reflecting the easing pressure on wages. The moderation in wage growth is a key factor in the Fed’s assessment of inflationary pressures, as rapid wage increases can contribute to higher inflation.

Labor Market Indicators

Recent data, including declining vacancies and higher weekly jobless claims, underscore a cooler-yet-resilient labor demand. The increase in available workers is allowing companies to step back from the steep pay increases that have been a source of inflationary pressures over the past few years. This shift is a favorable development for the Fed, which has been raising interest rates to combat inflation.

Federal Reserve and Interest Rates

The closely-watched jobs report will surface just days after a significant panel discussion in Portugal that includes Fed Chair Jerome Powell. Investors will be keenly monitoring his comments for clues on how soon the US central bank may start lowering interest rates. Christine Lagarde, Powell’s euro-area counterpart, will also be on the panel at the European Central Bank’s annual forum in Sintra.

Consumer Spending and the Broader Economy

Despite higher borrowing costs, the US labor market remains healthy, allowing consumer spending and the broader economy to continue growing. The resilience in consumer spending is crucial for the overall economic outlook, as it drives a significant portion of economic activity.

Job Openings and Labor Market Dynamics

Another key report expected in the coming week will likely show a further decline in job openings, suggesting that companies are having greater success in filling positions. Openings for May are projected to have dropped below 8 million for the first time since early 2021. This reduction in job openings reflects a rebalancing of labor supply and demand.

Global Economic Context

While the US labor market shows signs of moderation, the global economic landscape remains dynamic. In Canada, the labor force survey for June will provide insights into the job market, which has struggled to keep pace with explosive population growth but has seen higher-than-average wage gains. Additionally, the second half of 2024 will kick off with a packed week of economic data from around the world, including Chinese business survey data and euro-zone inflation figures.

Asia: Purchasing Manager Indexes and Economic Data

It’s a big week for purchasing manager indexes (PMIs) in Asia. China’s official PMIs are expected to show steady activity in June, while the Caixin manufacturing PMI may tick lower. Other PMIs for countries like Indonesia, South Korea, Myanmar, Philippines, Malaysia, Thailand, Taiwan, Vietnam, and Singapore will also be published.

In Japan, the Bank of Japan’s Tankan survey is expected to show steady business sentiment in the second quarter. Japan’s household spending data later in the week may indicate increased outlays in May, supporting the possibility of a rate hike by the Bank of Japan as early as July.

Europe, Middle East, and Africa: Political and Economic Developments

Politics will dominate the region with crucial elections in the UK and France. In the UK, voters are expected to elect a new government, potentially shifting economic policies. In France, the first round of voting for the National Assembly takes place, with potential market reactions to the level of support for Marine Le Pen’s National Rally.

In the euro-zone, inflation data will be closely watched, with economists anticipating a slight slowdown in price growth. The ECB’s annual retreat in Sintra will also be a focal point, with discussions on economic issues and policy decisions.

Latin America: Economic Activity and Central Bank Policies

In Latin America, economic activity and demand are on the rise in countries like Chile, while inflation reports from Peru will highlight the persistence of core inflation. In Colombia, the central bank is expected to continue its rate cuts, following a recent reduction in borrowing costs.

Conclusion

The moderation in US employment and wage growth in June is a significant development for the Federal Reserve’s efforts to manage inflation. As the global economic landscape continues to evolve, the Fed will closely monitor these indicators to inform its monetary policy decisions. The upcoming economic data from various regions will provide further insights into the global economic outlook, helping investors and policymakers navigate the challenges ahead.