The latest labor market report offers a mixed picture, with some positive signs but also indications of a potential slowdown.
Positive Highlights:
- Strong Employment: Employment levels among prime-age workers (25-54) remain robust.
- Solid Wage Growth: Average hourly earnings continue to increase.
Concerns:
- Underlying Job Creation: Revisions suggest weaker underlying job creation in recent months.
Fed's Response:
- Rate Cuts: The Fed is likely to reduce interest rates to support the economy.
- Timing and Magnitude: The extent and pace of rate cuts are still uncertain, with differing views among Fed officials.
- Market Expectations: Markets are already pricing in substantial rate cuts.
Upcoming Data:
- Economic Indicators: Key economic data, including CPI, PPI, and retail sales, will provide further insights before the Fed's decision.
The economy faces the question of whether the current slowdown will worsen or stabilize. The Fed's actions will be crucial in influencing this outcome.
US employers added fewer workers in August than forecast and job growth in the prior two months was marked down, further evidence of a softening labor market that’s fueling debate over how much the Federal Reserve should reduce interest rates.
Shortly after the figures were released, Fed Governor Christopher Waller said in a speech that he was “open-minded” about the potential for a bigger rate cut and would advocate for one if appropriate. “The current batch of data no longer requires patience, it requires action,” he said. US central bankers meet on Sept. 17-18.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets, and geopolitics:
Employment has gained more moderately in the last three months and a broader measure of unemployment edges higher in the last jobs report ahead of the Fed meeting
Source: Bureau of Labor Statistics, Bloomberg
Hiring fell short of forecasts in August after downward revisions to the prior two months. Payrolls rose 142,000 and job growth in the prior two months was revised down. Employment last month was weighed down by job losses in the manufacturing, retail trade, and information sectors.
Manufacturing activity shrank in August for a fifth month, reflecting faster rates of declines in orders and production. Declining orders and a persistent retreat in backlogs remain headwinds to production and illustrate a struggling manufacturing sector. While the Institute for Supply Management gauge of factory employment rose, it still showed a third month of contraction.
Swing-State Voters Like Trump Tax Proposals
Share of swing-state voters who said "strongly support" or "somewhat support"
Source: Bloomberg News/Morning Consult poll
Note: Poll of 4,962 registered voters in Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin, conducted Aug. 23-27 with a statistical margin of error of ±2% for Trump and Harris voters.
Former President Donald Trump’s proposals for targeted tax breaks are resonating with battleground-state voters, who overwhelmingly approve of his ideas to eliminate taxes on tipped income and retirement benefits.
Europe
Car Production Volumes Show Euro Area Falling Behind
Source: European Central Bank
Note: 12-month moving average, December 2017 = 100
Volkswagen AG is considering factory closures in Germany for the first time in its 87-year history, parting with tradition and risking a feud with unions in a step that reflects the deep woes roiling Europe’s auto industry. After years of ignoring overcapacity and slumping competitiveness, the German auto giant’s moves are likely to kick off a broader reckoning in the industry.
Swedish Air Travel Remains Below Pre-Pandemic Levels
2018 was the peak year for total passenger numbers
Source: The Swedish Transport Agency, Swedavia, Bloomberg
Note: 2024 estimate extrapolates Jan.-July development to full-year
The Swedish government plans to scrap an aviation tax from July next year to help domestic businesses in a controversial move that is also expected to increase carbon emissions in the country that coined the phrase “flying shame.” The Swedish government has been criticized for backsliding on climate policies after previous spending plans that led to increased emissions.
German industrial production dropped in July — highlighting the underlying troubles of Europe’s largest economy after it unexpectedly shrank last quarter. Output decreased 2.4% from June, worse than all estimates in a Bloomberg survey of economists. Automotive was the main driver, though most sectors were down.
Asia
China Services Expansion Slows in August
Private purchasing managers’ index expands less than expected
Source: Bloomberg, Caixin and S&P Global
China’s services activity expanded less than expected, adding to worries over the economy’s health. The findings add to a picture of an economy at risk of stalling. Official data published last weekend showed service industries from restaurants to tourism near contraction during the last month of summer.
Growing Demands
Japan's ministries seek a record budget for fiscal 2025
Source: Ministry of Finance
Japan’s ministries have set a new record with their budget requests for the year starting April 2025, as the nation wrestles with the need to ramp up social security and defense spending while keeping its mountain of debt under control.
India's Youth Unemployment Has Barely Budged in Modi Years
Indians aged 15-29 not in employment, education, or training
Source: "India Employment Report 2024: Youth employment, education and skills" released by the International Labour Organization
Job fairs overcrowded with disillusioned graduates are a stark reality check for bullish investors betting on India as the next big global growth engine. For all the optimism that’s luring investment from the likes of Apple Inc., the reality across most cities and villages is that the “boom” just isn’t creating enough quality jobs for the millions of people entering the workforce each year.
Emerging Markets
Brazil's Economy Surges Through Second Quarter 2024
Consumers spent heavily despite facing tight financial conditions
Source: National statistics agency, central banks, Bloomberg
Brazil’s economic growth picked up much more than expected in the second quarter, powered by strong consumer spending, raising the prospect of interest-rate hikes shortly. Gross domestic product expanded a whopping 1.4% in the April-June period, which surpassed all forecasts in the Bloomberg survey and was far more than what economists were predicting at the beginning of the period.
World
Central Bank Watch
Change in borrowing costs this year
Source: Bloomberg
Note: Mapped data show a change in interest rates for distinct central banks since the start of 2024.
The Bank of Canada lowered interest rates for a third straight meeting. — Chile cut. Poland’s central bank left borrowing costs unchanged, as did Malaysia and Egypt.
If you're struggling to find a job, perhaps you can take solace in an age-old saying: It's not you. It's the labor market.
Sure, you've experienced some high highs. The era of the Great Resignation and zero interest rates meant corporate America was practically handing out jobs — and big raises to boot.
But that era is long gone. Interest rates are up, mass layoffs have roiled some industries, and raises are far more paltry. The release of the Bureau of Labor Statistics' latest employment report on Friday put the final nail in the coffin. While skilled vocational trades like health services and construction were big drivers of job gains in August, sectors like information, which encompasses tech and white-collar fields, haven't fared as well.
"A couple years ago, every industry was growing really quickly, and there's all these great opportunities across the board," Nick Bunker, the economic research director for North America at the Indeed Hiring Lab, told Business Insider.
But that's not the case anymore.
With the cooler labor market, Bunker said, there isn't a "clear industry" you can argue will have much more job growth. And so-called laptop jobs — the kind where workers can theoretically log in from anywhere — are particularly imperiled. Roland Hesmondhalgh, a 32-year-old in Virginia with a master's degree, previously told BI that he was stuck between being overqualified for roles he applied to and still not landing interviews.
"It does feel like we're on this two-track labor market," Aaron Terrazas, the chief economist at Glassdoor, told BI before the release of the latest employment report. The demand for frontline work is still there, he said, and there are still challenges in filling those positions and roles in skilled vocational trades.
"That's the opposite case when it comes to skilled knowledge work, white-collar office work or home office work — there is a lot more labor supply there and a lot softer demand," Terrazas added.
Job openings in the information sector fell by more than 40,000 from July 2023 to July 2024. In July 2023, the job-opening rate in information was 5%; by this July, it had tumbled to 3.6%. And while job openings did fall in sectors like construction and healthcare, the total number of openings still far exceeded those for information roles.
This tells us the market for white-collar workers is a stayer's, not a seeker's, market.
"This is a labor market where if you have a job you like, you're in a pretty good position," Julia Pollak, the chief economist at ZipRecruiter, said. "If you don't have a job, if you're a new grad, finding a job is actually unusually difficult — especially in the private sector outside of healthcare."