Exploring Economic Indicators: July 2024 Employment

Economic indicators are released every week to provide insight into the overall health and performance of an economy. They serve as essential tools for policymakers, advisors, investors, and businesses because they allow them to make informed decisions regarding business strategies and financial markets. In the week ending on August 1st, the SPDR S&P 500 ETF Trust (SPY) rose 0.85% while the Invesco S&P 500® Equal Weight ETF (RSP) was up 1.40%.

Some of the most closely watched economic indicators are those surrounding the labor market. They provide insight into the health of the economy, directly impact individuals’ lives and play a central role in government policy decisions. At their meeting last week, the Fed voted to keep interest rates between 5.25% and 5.50% for an eighth consecutive meeting. But it signaled rate cuts are likely to begin at their next meeting in September. This article will discuss key data points from last week’s labor market reports and explore their potential implications.

Employment Report

The U.S. labor market cooled further last month as hiring slowed and unemployment rose. The July employment report revealed 114,000 jobs were added last month, falling short of the expected 176,000 addition. Hiring has now decelerated for three straight months. Additionally, previous months were revised lower, adding to the narrative of a weakening labor market.

The report also revealed a fourth consecutive increase in the unemployment rate to 4.3%, its highest level since October 2021. Additionally, hourly earnings increased 0.2% from the previous month and 3.6% from one year ago. Both readings marked a slowdown from June and were lower than their respective forecasts.

Overall, the latest jobs report supports the idea that the Fed will begin to cut rates later this year but has also fueled worries that the Fed may have waited too long. At the time of writing, the CME FedWatch Tool is currently projecting a 50 basis point cut at the September meeting with additional cuts to follow at the November and December meetings.