An unsurprising assessment from RBC Economics on US data on Friday. Data links are in this ICYMI post:
In the lines of the report:
- Core employment grew by 209k in June in the US, which is lower than the decreasing rate of 306k in May. The unemployment rate fell and hours worked rose among the private sectors the most, by 0.4%.
- The still tight labor market is working against moderating wage growth. Wages grew 4.4% from a year ago in June in the US, still well above the average rate of 2.5% in the decade before the pandemic. This was also the sixth month that wage growth has continued around this level. In fact, the downturn in wage growth appears to have lost downward momentum after reversing from the peak rate of 5.9% in March 2022.
- However, early indications are that labor demand is slowing down from very high levels. Employment opportunities continue the declining trend and so does the resignation rate (in balance) among private sector employees.
On the implications of the Federal Open Market Committee (FOMC):
- We continue to expect higher interest rates since early 2022 to slow demand for workers before driving up unemployment later this year. But the decline in labor demand is not yet visible in any of the headline numbers.
- As noted in the meeting minutes of the FOMC’s last decision in June, policymakers still view current labor market conditions as too tight, and wage gains too high for inflation to adequately return to the additional 2% target.
- We expect the Fed to raise the federal funds rate by 25 basis points in July.
The Federal Open Market Committee meets July 25-26:
