Evelyn Reynolds

The nonfarm report Friday from the Bureau of Labor Statistics is forecast to show payroll gains of 185,000 in July, down from 206,000 in June.
Job gains have averaged 203,000 a month for the first half of 2024 while the unemployment rate has drifted higher.
Average hourly earnings are forecast to show a 0.3% increase on the month and 3.7% from year ago. If the latter is correct, it will represent the lowest earnings increase since May 2021.

People line up as they wait for the JobNewsUSA.com South Florida Job Fair to open at the Amerant Bank Arena on June 26, 2024, in Sunrise, Florida. 
Joe Raedle | Getty Images

The U.S. labor market may have cooled some in July, as a gradual slowdown in the economy and Hurricane Beryl are expected to have taken some of the steam out of hiring.
Still, even if the Labor Department’s nonfarm payrolls report for July, to be released Friday at 8:30 a.m. ET, does indicate a weaker jobs picture, the decline is expected to be only incremental and in keeping with the type of gentle downshift the Federal Reserve is looking to engineer.

“If the Fed was going to manufacture the soft landing, this is probably what it was going to look like,” said Mike Reynolds, vice president of investment strategy at Glenmede. “You’re seeing just modest on-the-margin weakness in the labor market that [isn’t likely to] spiral out of control into a negative feedback loop.”
Indeed, the report from the department’s Bureau of Labor Statistics is forecast to show payroll gains of 185,000 on the month, down from 206,000 in June, with the unemployment rate holding at 4.1%, according to the Dow Jones consensus estimate. Job reports for the past year and a half have routinely beaten the consensus.
But some economists think the report could be on the light side; Goldman Sachs expects Beryl, which ravaged large parts of Texas, particularly Houston, to pull down the jobs number by 15,000. The firm thinks the total payroll gain will be more like 165,000. Citigroup projects an even lower number — 150,000 on payrolls and a tick higher in the unemployment rate to 4.2%.
Should the unemployment rate keep climbing, it could raise fears that the so-called Sahm Rule is in danger of being triggered. The rule has observed without fail that when the unemployment rate over a three-month period averages half a percentage point higher than the 12-month low, the economy is in recession. A year ago, the jobless level as at 3.5% before it started climbing.

Optimism at the Fed

Job gains have averaged 203,000 a month for the first half of 2024, while the unemployment rate has drifted higher as more workers have come into the labor force and the level of those considered unemployed but looking for work or temporarily laid off has hit its highest level since October 2021.

Fed Chair Jerome Powell on Wednesday noted that the previous disparity between supply and demand in the labor market has come into near-balance. Open jobs now outnumber available workers just 1.2 to 1, down from 2 to 1 a few years ago as inflation roared.

Should the factors continue to come into balance and other inflation indicators show progress, Powell strongly hinted that an interest rate cut could be coming in September.
“Our confidence is growing, because we’re getting good data,” he said at a news conference following the Fed’s policy meeting. “Frankly, the softening in the labor market conditions gives you more confidence that the economy’s not overheating.”
Markets will be watching Friday’s numbers for confirmation that Powell’s view on the labor market is accurate — and that the Fed isn’t overconfident and waiting too long to start lowering rates.
There has been a growing chorus on Wall Street for the Fed to start easing now that most indicators show that the inflation rate is only a short distance from the central bank’s 2% goal. DoubleLine CEO Jeffrey Gundlach, for instance, told CNBC on Wednesday that he thinks the economy already is teetering on recession.
“When we look back at today, …. I kind of believe that we will say that we were in recession in September 2024,” he said.

Eyes on earnings

The Fed at its meeting voted to hold its benchmark overnight borrowing rate in a range of 5.25%-5.5%, where it has been for the past year.
Markets rallied on the news but gave back those gains Thursday following news that unemployment claims rose last week and the manufacturing sector slumped further into contraction.
“By holding off on cutting interest rates today, the Federal Open Market Committee is betting the labor market is strong enough to wait until the fall for confirmation that inflation is returning to 2%,” said Nick Bunker, Indeed Hiring Lab’s economic research director for North America. “Let’s hope it pays off.”
As always, markets also will have eyes on the average hourly earnings portion of the report for signs of underlying inflation.

The forecast is that earnings rose 0.3% on the month and 3.7% from year ago. If the latter is correct, it will represent the lowest earnings increase since May 2021.
“Even if wage pressures were to unexpectedly remain ‘stuck’ or slightly re-accelerate in this report, we think that the progress the Fed has made on inflation thus far means that there should still be an opportunity for the Fed to cut rates in September so long as subsequent data releases (eg July CPI) cooperates,” said BeiChen Lin, investment strategist at Russell Investments.

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The NewsProductivity grew at a 2.3 percent annual rate in the second quarter, the U.S. Bureau of Labor Statistics reported on Thursday, surpassing economists’ expectations. The pickup was a major improvement upon the sluggish 0.4 percent rate in the first quarter. And on a yearly basis, productivity increased 2.7 percent. That far exceeds prepandemic averages.An assembly line at a car plant in Michigan in April.Bill Pugliano/Getty ImagesWhy It Matters: A key to prosperity.A highly productive economy generally means businesses and workers are operating efficiently, making more money in fewer hours. In the second quarter, production was up 3.3 percent, while hours worked rose 1 percent.On a less technical level, productivity is best explained by the old axiom of “doing more with less” or the folksy virtue of “getting the biggest bang for your buck.”Economists tend to sigh with relief when they see productivity gains because it offers a potential “win-win” for workers, customers and business owners: If businesses can make more money in fewer work hours, then — according to basic economic logic — they can presumably make more dollars per hour, while also reinvesting and giving workers raises, without sacrificing profits.Being able to make more with less (or with the same amount of labor and machinery) also means businesses may not feel as much pressure to set higher prices to push profits. That, too, is welcome news after a yearslong bout of inflation.Facts to Keep in Mind: A volatile indicator.Productivity, at a basic level, is calculated as a simple ratio: the total amount of output an economy produces per hour worked by its labor force. But the output side of the equation is adjusted for inflation on a quarterly basis. That can cause volatility, in both directions.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Markets are pricing in an aggressive path for interest rate cuts starting in September with a quarter percentage point reduction, which would be the first since the early days of the Covid crisis.
“The Fed needs to start that process back gradually to normal, which means gradually reducing interest rates,” said economist Claudia Sahm, known for devising a rule that uses unemployment as a yardstick for recessions.
DoubleLine CEO Jeffrey Gundlach also thinks the Fed is risking recession by holding a hard line on rates.

Federal Reserve Chairman Jerome Powell arrives to speak at a news conference following a Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building on July 31, 2024 in Washington, DC. 
Andrew Harnik | Getty Images

If the Federal Reserve is starting to set the table for interest rate reductions, some parts of the market are getting impatient for dinner to be served.
“What is it they’re looking for?” Claudia Sahm, chief economist at New Century Advisors, said on CNBC just after the Fed concluded its meeting Wednesday. “The bar is getting set pretty high and that really doesn’t make a lot of sense. The Fed needs to start that process back gradually to normal, which means gradually reducing interest rates.”

Known for formulating the Sahm Rule that uses changes in the inflation rate to gauge when recessions occur, Sahm has been clamoring for the central bank to start easing monetary policy so it doesn’t drag the economy into recession. The rule states that when the three-month average of the unemployment rate is half a percentage point above its 12-month low, the economy is in recession.
The 4.1% jobless level is only a short distance from triggering the rule, and Sahm said the Fed’s insistence on holding short-term interest rates at their highest level in 23 years is endangering the economy.
“We don’t need a weak economy to get that last little bit out of inflation,” she said. “We do not have to be afraid of a good economy. If the inflation job is done, or we’re on that glide path, it’s OK, the Fed can start stepping aside.”
Asked about the Sahm Rule during his post-meeting news conference, Fed Chair Jerome Powell called it a “statistical regularity” that doesn’t necessarily hold true this time around as the jobs picture remains strong and the pace of wage gains decelerates.
“What it looks like is a normalizing labor market, job creation and a pretty decent level of wages going up at a strong level but coming down gradually,” he said. “If it turns out to … show something more than that, then we’re well-positioned to respond.”

Cautious approach

Markets, though, are pricing in an aggressive path for rate cuts starting in September with a quarter percentage point reduction, which would be the first since the early days of the Covid crisis.
After that, markets expect cuts in November and December, with an about 11% probability assigned to the equivalent of a full percentage point lopped off the fed funds rate by year end, according to the CME Group’s FedWatch gauge of 30-day fed funds futures contracts.
Instead of starting to take its foot off the brake, the Fed on Wednesday said it is keeping its overnight borrowing rate in a range between 5.25%-5.5%. The post-meeting statement did note progress made on inflation, but also reiterated that policymakers on the rate-setting Federal Open Market Committee need “greater confidence” that inflation is heading back to 2% before they will be ready to lower rates.
DoubleLine CEO Jeffrey Gundlach also thinks the Fed is risking recession by holding a hard line on rates.
“That’s exactly what I think because I’ve been at this game for over 40 years, and it seems to happen every single time,” Gundlach said, speaking to CNBC’s Scott Wapner on “Closing Bell.” “All the other underlying aspects of employment data are not improving. They’re deteriorating. And so once it starts to get to that upper level, where they have to start cutting rates, it is going to be more than they think.”
In fact, he thinks the Fed could end up slashing rates by 1.5 percentage points over the next year, a pace that’s more aggressive than the policymakers charted when they last updated the “dot plot” of individual projections.
Gundlach figures that the consumer price index will be below 3% soon, making real rates, or the difference with the fed funds rate, particularly high.
“If you have a positive real interest rate that’s even one and a half percent, that would suggest you have 150 basis points of room to cut rates without even thinking that you’re being excessive about it,” he said. “I think they should have cut today, quite frankly.”

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The Federal Reserve sets interest rates, and it operates independently of the White House. But rates could come down as inflation cools.Former President Donald J. Trump, the Republican candidate for the 2024 presidential race, promised lower interest rates — which a president does not actually control — if he is elected.Asked on Wednesday what he would do on “Day 1” of a new presidency during a panel at the National Association of Black Journalists convention in Chicago, Mr. Trump said one priority would be to “drill, baby, drill,” the shorthand tagline he has adopted for promoting oil and gas production in the United States.“I bring energy way down, I bring, interest rates are down, I bring inflation way down,” Mr. Trump expanded.The president exerts no direct control over interest rates. The Federal Reserve sets a key policy rate, which then trickles out to influence borrowing costs across the economy, and the Fed is independent from the White House.Mr. Trump has at times implied that the Fed will lower rates because inflation is likely to be lower on his watch, which could have been what he meant on Wednesday. Economists have suggested that some of his proposed policies may in fact speed up inflation.Still, the candidate’s comments underscore how politically salient both price increases and high interest rates remain as the Nov. 5 election nears, even after years in which inflation has been gradually cooling. And they make it clear that the coming months are likely to be politically fraught for the Fed as the technocratic institution tries to stay outside the political fray.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The ruling, raising the minimum wage and phasing out a lower wage for tipped workers, said legislators had acted improperly in dodging a referendum.The Michigan Supreme Court ruled on Wednesday that legislators had unconstitutionally subverted a voter-sponsored proposal to raise the state’s minimum wage.As a result of the 4-to-3 ruling, labor groups expect Michigan’s hourly minimum wage of $10.33 to increase by at least $2 in February, once the state treasurer calculates inflation adjustments. There will be subsequent cost-of-living increases through 2029.In addition, tipped workers, who currently can be paid as little as $3.84 per hour, will be subject to the same minimum as all other workers by 2029, putting Michigan on a path to be the eighth state to establish a standard wage floor for all workers.Labor activists and union groups celebrated the Michigan court’s decision.“We have finally prevailed over the corporate interests who tried everything they could to prevent all workers, including restaurant workers, from being paid a full, fair wage with tips on top,” Saru Jayaraman, the president of One Fair Wage, a national nonprofit organizing group, said in a statement.Her group is directly cited in the case because of its involvement in gathering the necessary signatures from Michiganders in 2018 to invoke the ballot initiative and send the proposal to the Legislature, which Republicans led at the time.To prevent the wage increase proposal from reaching the 2018 general election ballot, a large cohort of restaurateurs — led by the Michigan Restaurant and Lodging Association — pushed the Legislature to simply adopt the proposal sponsored by One Fair Wage and other groups, which the Legislature did. Legislators then rolled back the law’s provisions after the election.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The New York Times wants to hear from recent college graduates, other young job seekers and hiring managers about this year’s job market.The economy is growing. Unemployment is low. But the job market is not as hot as it used to be, and younger applicants, with or without college degrees, are feeling the pinch. Hiring projections for this year’s college graduating class are below last year’s, and the downturn is particularly notable in fields like finance, insurance, marketing and real estate.I cover economics at The New York Times, and I would like to hear from recent college graduates and other young job seekers, as well as hiring managers, about what the job market has looked like to them this year.Your responses will help us gain a fuller, more nuanced understanding of how the broader trends are being felt — or, in some cases, overcome.We’ll read every response, and we’ll reach out to some people to learn more. We won’t publish your name or any part of your submission without hearing back from you and verifying your story. And we won’t share your contact information outside the Times newsroom. If you prefer to share tips or thoughts confidentially, you can do so here.Our first set of questions are for job seekers, and then we have questions for hiring managers.Tell us about your recent experience in seeking work — or workers. More

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Private payrolls increased by just 122,000 in July, the slowest pace since January and below the upwardly revised 155,000 in June and the estimate for 150,000, ADP reported.
Wages for those who stayed in their jobs increased 4.8% from a year ago, the smallest increase since July 2021.

A “Now Hiring” sign is seen at a FedEx location on Broadway on June 07, 2024 in New York City. 
Michael M. Santiago | Getty Images

Private job growth slowed further in July while the pace of wage gains hit a three-year low, payrolls processing firm ADP reported Wednesday.
Companies added just 122,000 jobs on the month, the slowest pace since January and below the upwardly revised 155,000 in June. Economists surveyed by Dow Jones had been looking for a gain of 150,000.

ADP also reported that wages for those who stayed in their jobs increased 4.8% from a year ago, the smallest increase since July 2021 and down 0.1 percentage point from June.
“With wage growth abating, the labor market is playing along with the Federal Reserve’s effort to slow inflation,” said ADP chief economist Nela Richardson. “If inflation goes back up, it won’t be because of labor.”
Futures tied to major stock indexes added to gains following the report while Treasury yields fell.
There was more positive inflation news Wednesday, as the Labor Department’s Bureau of Labor Services reported that the employment cost index, an indicator Fed officials watch closely, increased just 0.9% in the second quarter, according to seasonally adjusted figures.
That was below the 1.2% acceleration in the first quarter and the Dow Jones estimate for a 1% increase.

Both reports could add to the likelihood that the Fed will signal a September rate cut when it concludes its two-day meeting later in the day.
Job growth was heavily concentrated in two sectors — trade, transportation and utilities, which added 61,000 workers, and construction, which contributed 39,000. Other sectors seeing gains included leisure and hospitality (24,000), education and health services (22,000) and other services (19,000).
Several sectors reported net losses on the month. They included professional and business services (-37,000), information (-18,000) and manufacturing (-4,000). Companies that employ fewer than 50 people also registered a loss, down 7,000 in June.
Geographically, the job gains were concentrated in the South, which saw a gain of 55,000, while the Midwest added just 17,000..
The ADP report comes two days before the Labor Department’s Bureau of Labor Services releases its nonfarm payrolls count, which, unlike the ADP tally, includes government jobs. The two reports can differ substantially, with ADP overshooting the BLS estimate of 136,000 for private payrolls in June.
Economists expect job growth of 185,000 in July, down from 206,000 in June, with the unemployment rate holding steady at 4.1%. More