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Making Sense

Could July’s jobs report lead to a series of rate cuts?

Aug 2, 2024
Mike Feroli, Chief U.S. Economist at J.P. Morgan, and Phoebe White, Head of U.S. Inflation Strategy, dissect the recent July employment report, revealing a modest rise in unemployment and wage growth declines. They analyze the participation rates and sector-specific job gains, while also addressing the broader economic growth of just 1%. The duo explores the Federal Reserve's potential for rate cuts amidst a softening economy, highlighting the market’s expectations for continued easing through next year.
06:55

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Quick takeaways

  • The July employment report signals a softening labor market with rising unemployment and declining work hours indicating reduced labor demand.
  • Speculation regarding the Federal Reserve suggests potential rate cuts ahead to address imbalances in employment and inflation amidst economic slowdown.

Deep dives

Recent Employment Report Signals Economic Softening

The US employment report indicates a softening labor market, highlighted by an increase in the unemployment rate to 4.3%. There has been a decline in average work hours and slower growth in average hourly earnings, suggesting reduced labor demand. Additionally, the report reflects a rise in temporary layoffs, possibly linked to adverse weather conditions, but these effects do not fully account for the overall trends observed. Despite the uptick in labor supply, evidenced by an increased participation rate, both job growth and the average workweek have shown signs of weakness.

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