Job seekers attend the JobNewsUSA.com South Florida Job Fair on June 26, 2024 at Amerant Bank Arena in Sunrise, Florida.
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The June payrolls report takes on added significance as signs mount that the labor market is slowing, if not getting worse.
So far in 2024, salary growth has totaled 1.24 million, which is about 50,000 less than the same period last year. Economists surveyed by Dow Jones expect the report, due out at 8:30 a.m. ET on Friday, to show growth of 200,000, down from 272,000 reported in May.
From a historical perspective, the pace of employment growth remains solid. But there are signs that things could get softer and could point to broader economic weakness ahead.
“This report comes at a time when the economic situation is more uncertain than it was just a few months ago,” said Nick Bunker, director of economic research at Indeed Hiring Labs. “Specifically, I’m thinking more about the unemployment rate, It’s been slowly rising.”
The unemployment rate did rise to 4% in May, the first time it hit that threshold since January 2022, above 3.7% a year ago. Interest rates are forecast to remain at this level.
Under normal circumstances, an unemployment rate of 4% would be cause for celebration, not concern. What has some economists concerned, however, is how rates now compare to rates over the past year.
May’s interest rate was 0.5 percentage point higher than the 12-month low of 3.5% hit in July 2023, potentially triggering a recession indicator known as Sam’s rule. The rule has consistently shown that the economy enters a recession whenever the three-month average unemployment rate exceeds a half percentage point above the 12-month low.
While there isn’t much data to suggest a recession is imminent, the unemployment trends are causing some concern.
“If the unemployment rate is rising slowly, as it has been for some time, I don’t think that means we are at a high risk of triggering Sam’s rule or any form of unemployment — which is a fundamental measure of entering a recession,” Bunker said. “That being said, the likelihood of this happening has increased, even if it’s not the most likely outcome right now. “
Economic slowdown in first half of 2024. Annual growth rate is 1.4%while the economic growth rate tracked by the Atlanta Federal Reserve is only 1.5% second season.
Lingering concerns about inflation may keep the Fed on the sidelines on cutting interest rates for some time.
In addition to the overall employment and unemployment data, market participants and economists will be watching several other key indicators.
Another area of concern is the discrepancy between nonfarm employment numbers obtained from establishments participating in the BLS survey and the number of households reporting that they are employed.
While agency surveys show employment increased by about 2.8 million over the past 12 months, the number of households used to calculate the unemployment rate increased by only 376,000. Economists generally view the agency survey as more reliable and less volatile because it contains a larger sample size, but the discrepancy has raised some concerns.
Additionally, hours worked and average hourly earnings will receive some attention as indicators of inflation.
Monthly wage growth is forecast to be 0.3% and 12-month growth is 3.9%. If the outlook holds, it would mark the first time annual growth has fallen below 4% since June 2021.
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