Based on recent developments there are signs that the labor market is at least slowing down.
Job growth so far in 2024 totals 1.24 million, down about 50,000 a month compared to the same period last year. Economists polled by Dow Jones expected a report due out on Friday to show growth of 200,000, down from the 272,000 reported for May.
In terms of historical data, the rate of job growth is still strong. However, there are signs that conditions could soften and may point to more widespread economic weakness in the future.
The unemployment rate in May rose to 4%, the first time it has reached that level since January 2022, up from 3.7% a year ago. The forecast is that the rate will remain there.
Under normal circumstances, a 4% unemployment rate would be cause for celebration, not concern. Still, what's interesting to some economists is where rates are moving now compared to where they were a year ago.
The rate in May was 0.5 percentage points higher than its 12-month low of 3.5% in July 2023, potentially triggering an indicator of recession called the Sahm Rule. This rule has consistently shown that when the three-month average unemployment rate exceeds its 12-month low by half a percentage point, the economy is in recession.
While there are few data signs that a recession is on the way, trends in unemployment remain striking.
The economy has grown slowly in the first half of 2024. First-quarter growth as measured by gross domestic product rose at an annual rate of 1.4%, while the Atlanta Federal Reserve tracked growth of 1.5% in the second quarter.
In addition to the headline wage and unemployment numbers, market participants and economists will be monitoring several other key metrics. Among them is NFP data. Additionally, hours worked and average hourly earnings will gain attention as inflation gauges.
