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May Jobs Report - What to Expect and What It Means for the U.S. Economy

TL;DR intro

  • Economists predict 190,000 jobs were added in May:with the unemployment rate steady at 3.9%.
  • The jobs report could confirm the economy has slowed in 2024:
  • The U.S. economy created 175,000 jobs in April:the lowest level this year but consistent with an expanding economy, albeit slower than last year.

What to Expect in the May Jobs Report

This Friday, the Labor Department will release its much-anticipated jobs report for May, and economists forecast a gain of 190,000 jobs. They also expect the unemployment rate to hold steady at 3.9%.

Allison Kaminaga, a professor of economics at Bryant University, notes that the labor market remains resilient. “Unemployment picked up and job growth did slow but 3.9 is still pretty strong by historical standards," Kaminaga said.

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Economic Indicators Signal a Slowdown

While the labor market shows strength, other economic indicators suggest a slowdown. Last week, the first-quarter gross domestic product (GDP) growth was revised downward to 1.3%, indicating a deceleration in economic activity.

Economists and investors will be closely watching the jobs report for further signs of a cooling labor market. A slower economy could prompt the Federal Reserve to lower interest rates, providing relief to consumers facing high prices. However, there is also concern that a significant slowdown and reduced consumer spending might lead to a recession later this year or early next.

On Tuesday, the number of job openings for April was released, showing a decline to around 8.36 million as employers return to normal hiring patterns. On Wednesday, private payroll firm ADP issued its monthly employer survey for May, forecasting 190,000 new jobs, following April's 175,000.

Comerica Bank economists Bill Adams and Waran Bhahirethan stated, “The May jobs report will likely show payroll employment growth holding under 200,000 for a second month in a row, with the unemployment rate steady at 3.9%. That's not high, but you can see the difference between it and the half-century low of 3.4% reached in the first half of 2023 without your glasses on. Average hourly earnings growth likely moderated further in year-over-year terms. Job openings, released at a one-month lag to the level of employment, likely fell again in the latest release for April."

Impact of Slower Consumer Spending

The May jobs report comes after markets reacted to news of slower consumer spending and a softening economy. A key inflation metric favored by the Federal Reserve showed continued slowing in inflation, with a 0.1% month-over-month decline in inflation-adjusted spending.

BCA Research noted in a client report, “We expect disinflation will make sufficient progress to allow rate cuts to begin this year. National rental markets continue to ease, a trend that will drag shelter inflation lower. Wage growth is also decelerating in line with leading wage growth indicators. Concurrently, consumer credit has become scarce and excess savings have dwindled. We thus expect consumers will put less upward pressure on aggregate demand growth in the coming quarters."

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Looking Ahead

The revised first-quarter economic growth figures reflect consumer fatigue with high prices. As the economy shows signs of deceleration, the upcoming jobs report will be pivotal in assessing the labor market's health and the broader economic outlook.While the labor market remains robust, the anticipated jobs report and other economic indicators suggest a cautious watch on the potential for an economic slowdown.

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