The most recent jobs report for June indicates that the US economy is demonstrating robust recovery signs while nearing a soft landing. The number of jobs added exceeded expectations, resulting in a slight increase in the unemployment rate from 4.0% in May to 4.1%. This trend points to more individuals actively seeking employment, despite a moderation in wage growth.
Throughout the year, inflation has also begun to ease, with the Consumer Price Index reflecting a year-over-year rise of 3.2% in May, down from April’s 3.4%. The persistence of a firm yet gradually slowing job market suggests that the Federal Reserve has successfully tackled inflation without triggering a significant economic downturn. During the latest Federal Open Market Committee meeting in June, discussions hinted at only one potential interest rate cut for the year 2024.
Nonetheless, Fed Chair Jerome Powell indicated that if economic circumstances keep improving, a rate reduction in September is seen as “plausible.”
According to CME FedWatch, which provides market insights on interest rate cut probabilities, there is a 93% likelihood that interest rates will stay unchanged in July and a 72% probability for a cut by September.
Optimism in the economy with job growth
Economists like Jan Hatzius, the chief economist at Goldman Sachs, opine that the recent data should instill confidence in the Fed’s decision-making.
Hatzius remarked in a recent interview with CNBC that the jobs report “assures Fed officials that the labor market is stabilizing” and bolsters the chances of a rate reduction come September. The Bay Area also recorded job increases in June, mainly driven by growth in the East Bay, although there were job losses in the tech-centric South Bay and San Francisco. According to a report from the U.S. Bureau of Labor Statistics released on Friday, the Bay Area created 2,200 new jobs in June.
Even with the downturn in the San Francisco tech sector, the overall job outlook in the Bay Area appears to be improving. Scott Anderson, the chief U.S. economist at BMO Capital Markets, observed that “Bay Area job growth accelerated in the second quarter after a mixed performance in the first quarter. The prevailing economic pessimism across the state and within the Bay Area is beginning to subside.”
Experts caution, however, that the job market may experience instability throughout the remainder of 2024.
Yet, if inflation continues to decline, potentially resulting in lower interest rates from the Federal Reserve, the employment landscape next year could be significantly more favorable.
