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James Myers of OAN
Friday, July 5, 2024 8:08 AM
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The Labor Department said on Friday that payrolls increased by 206,000 in June, but the unemployment rate remained above 4% for the same month.
The federal government also revised down its May payroll numbers to 218,000 from an earlier estimate of 272,000. The government also revised down its April payroll numbers to 108,000 from an earlier estimate of 165,000.
Stocks were little changed in early trading, but signs of a weakening labor market boosted investors’ hopes of a rate cut.
Analyst Neil Dutta said: Renaissance Macro Researchurged the Fed to “go ahead” with cutting interest rates.
“Today’s jobs report should strengthen expectations for a rate cut in September,” Dutta told Bloomberg News. “Economic conditions are cooling and the trade-offs for the Fed are different.”
Meanwhile, investors are hoping for news on the labor market that could prompt the Federal Reserve to cut interest rates in an effort to tame inflation.
This comes after economists predicted that high interest rates led by the Fed would stifle momentum in the labor market and lead to job gains.
“The labor market has really proven the doubters wrong,” said Andrew Flowers, chief economist at Upcast, which uses technology to help companies hire workers.
But higher borrowing costs due to the Fed’s interest rate hikes will weaken the job market, Flowers said.
“Ultimately, the economy will bend but it won’t break, and the gradual impact of higher interest rates will moderate job growth,” he said.
Moreover, there are plenty of signs that the economy is slowing: U.S. gross domestic product (goods and services combined) grew just 1.4% in January through March, the slowest quarterly growth in nearly two years.
Moreover, consumer spending, which accounts for about 70% of all U.S. economic activity, increased just 1.5% in the fourth quarter after growing by more than 3% in each of the previous two quarters.
The number of job advertisements has also been declining after reaching a record high of 12.2 million in March 2022.
“As demand cools, companies are cutting jobs,” said Bill Adams, chief economist at Comerica Bank.
“But they’re also laying off fewer workers than they were pre-pandemic. The job market is tight and companies don’t want to cut staff today only to realize they need more workers tomorrow and struggle to find them.”
In 2022 and 2023, the Fed has raised its benchmark interest rate 11 times in an attempt to overcome the worst inflation rate in 40 years by raising interest rates to their highest level in 23 years.
At a conference in Portugal, Fed Chairman Jerome Powell argued that policymakers need more evidence that inflation is heading toward the Fed’s 2% target level before cutting interest rates.
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