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US inflation cools again: Will it pave the way for a rate cut?
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US June Nonfarm Payrolls Preview: Business Survey Indicates Services Sector's Employment Is Losing Steam

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Investing with moomoo joined discussion · Jul 4 08:13
US June's nonfarm payrolls report will be released at 8:30 a.m. ET this Friday. The median forecast of analysts for the June nonfarm employment is 189K, down from 272K in May. The unemployment rate is expected to remain at 4.0%.
US June Nonfarm Payrolls Preview: Business Survey Indicates Services Sector's Employment Is Losing Steam
In June, the Services PMI registered 48.8 percent, a 5-percentage point decrease compared to the May reading of 53.8 percent. The report noted that "It indicates the overall economy is contracting for the first time in 17 months." The Employment Index also contracted, to a level of 46.1.
US June Nonfarm Payrolls Preview: Business Survey Indicates Services Sector's Employment Is Losing Steam
■ JOLTs data showed accommodation and food services hiring lost momentum.
The total number of job vacancies climbed by 221,000 from the month prior, reaching 8.140 million in May and surpassing market expectations of 7.91 million.
Still, the JOLTS report for May highlighted a noteworthy turning point for the US labor market. The ratio of job openings to unemployed individuals dropped to 1.22 available jobs per job seeker, matching the figure seen in February 2020, which was recorded just one month before the pandemic that jolted the global economy.
The so-called quits rate, which measures people who voluntarily leave their job, held at 2.2, the lowest since 2020. The quits rate suggests that people are less confident in their ability to find a new position than they were a couple years ago.
US June Nonfarm Payrolls Preview: Business Survey Indicates Services Sector's Employment Is Losing Steam
The largest increase in job openings was observed in state and local government, with 117,000 added positions. Conversely, the sector of accommodation and food services saw a significant decrease, shedding 147,000 job openings, and private educational services also experienced a drop with 34,000 fewer job openings. In terms of geographical changes, the Midwest led with an increase of 116,000 job openings, while the South encountered a decrease, losing 58,000 job openings.
■ ADP Employment fell below expectation
According to ADP report, private companies in the US saw an increase of 150,000 employees in June, lower than May's 157,000, marking the smallest growth in five months and falling short of the anticipated 160,000.
Exhibit: ADP Employment, Trading Economics
Exhibit: ADP Employment, Trading Economics
Within the service sector, 136,000 positions were added, although the information sector experienced a loss of 3,000 jobs. The goods-producing sector contributed 14,000 jobs, with construction adding 27,000 positions. In contrast, the natural resources and mining sector, along with manufacturing, saw job declines of 8,000 and 5,000, respectively. Nela Richardson, the chief economist at ADP, commented, "While job growth is steady, it is not widespread."
Year-over-year pay gains for job-stayers were 4.9 percent in June, the slowest pace of growth since August 2021. Pay gains for job changers also slowed to 7.7 percent.
■ The number of people applying for unemployment benefits rose in June
In the final week of June, the US saw initial unemployment claims increase by 4,000, reaching 238,000, which exceeded market forecasts of 235,000. This figure stays near the peak of 243,000 seen earlier in the month, which was the highest in ten months. Furthermore, the number of ongoing unemployment claims went up by 26,000, hitting 1,858,000 in the week prior, marking the highest level since November 2021.
Exhibit: Initial Jobless Claims, Trading Economics
Exhibit: Initial Jobless Claims, Trading Economics
The WARN (Worker Adjustment and Retraining Notification) tracker also showed that layoffs increased significantly in June, indicating a weakening labor market.
US June Nonfarm Payrolls Preview: Business Survey Indicates Services Sector's Employment Is Losing Steam
■ What's the implication for the Fed?
Officials at the Federal Reserve largely maintain that the job market is in a robust state, a sentiment that provides the central bank with the confidence to maintain interest rates at their highest point in 23 years. Nonetheless, some officials at the Fed have observed a recent loss of momentum in the job market and acknowledge that there is significant uncertainty as to whether it will remain stable or experience further weakening.
During a conference held by the European Central Bank in Sintra, Portugal, on Tuesday, Chicago Fed President Austan Goolsbee highlighted the delicate balance the Fed must strike. He pointed out that if employment starts to deteriorate or if there are signs of economic weakening, which some indicators suggest might be happening, this must be weighed against the progress being made in controlling inflation.
The market has priced in no interest rate cut in July, and the Fed is unlikely to cut interest rates in November in order to avoid suspicion in the face of the U.S. election. Therefore, if there is an interest rate cut, the decision is most likely to be announced in September. CME FedWatch showed the probability of a rate cut in September rose to 66.59% from 56.40% one month ago.
US June Nonfarm Payrolls Preview: Business Survey Indicates Services Sector's Employment Is Losing Steam
According to Bloomberg's poll, most institutions expect the first reduction could happen in September, including Goldman Sachs, Barclays and UBS. Nick Bunker, Indeed Hiring Lab's head of economic research, noted that it may take an interest rate cut to ensure employers' demand for workers doesn't tumble too far.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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