A Rate Cut Is Coming
That’s what the data say.
Initial claims for unemployment insurance continue to slowly climb. Continuing claims are also trending gradually higher.It’s possible these slow and gradual effects we’re seeing are simply seasonal noise.
It’s also possible the consequences of the Federal Reserve’s higher-for-longer stance will show up in greater and grimmer detail in coming weeks, that labor-market deterioration accelerates in the dog days of summer. This is Jobs Friday, so we have imminent and on point incoming data to evaluate
The consensus expects the Bureau of Labor Statistics to report that nonfarm payrolls expanded by 190,000 in June, down from 272,000 in May.
The unemployment rate is forecast to be steady at a two-year high of 4 percent.
The important number in this particular set of data from the BLS will be hourly earnings. That’s the fuel for spending in our consumer economy.
The consensus expects to see hourly earnings growth slow to 0.3 percent on a month-over-month basis from 0.4 percent in May.
Year-over-year wage growth will come in at 3.9 percent. And that would put it below 4 percent for the first time since 2021.
“Some participants,” the minutes read, “emphasized the Committee’s data-dependent approach, with monetary policy decisions being conditional on the evolution of the economy rather than being on a preset path.”
The target range for the federal funds rate has been 5.25 percent to 5.50 percent since July 2023. The current official forecast indicates a single 25-basis-point cut in 2024, down from three in March.
FOMC members noted that progress on inflation had been slower than expected in December.
They’ll convene again on July 30. Only a series of mass layoffs between now and then will ensure a rate cut at that two-day meeting. It’s just not likely to happen.
But there’s plenty of time for more incoming data to accumulate between now and September 18.
The case for a rate cut is building slowly and gradually. But it is building.
