The labor market is not as strong as predicted, with 818,000 fewer jobs. (iStock )
The U.S. Bureau of Labor Statistics just reported that the U.S. added 818,000 fewer jobs over the past twelve months (through March) than it previously forecast. The -0.5% difference was reported in the preliminary estimate of the annual revision of the BLS employment series. Consumers will not know the final figures until February.
The biggest discrepancy was in the professional and business services sector, with the review showing there were 358,000 fewer jobs than originally reported. Retail saw the second largest revision, with 129,000 fewer jobs. Manufacturing came in third with 115,000 fewer jobs.
The labor market is not in dire straits, but the unemployment rate is still hovering around 4.3%, which is higher than at the beginning of 2023, Federal Reserve Chairman Jerome Powell explained in recent comments.
The unemployment rate is not the result of more layoffs, but rather the large increase in the labor supply. It’s also due to “a slowdown in the previously frenetic pace of hiring,” Powell said. Overall, the labor market is getting stronger.
“Overall, the economy continues to grow at a solid pace,” Powell explained. “But inflation and labor market data show an evolving situation. Upside risks to inflation have declined. And downside risks to employment have increased.”
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The Fed is still ready to cut rates in September
Consumers have been waiting for a rate cut from the Federal Reserve since the possibility of multiple rate cuts was announced early this year. September finally appears to be the meeting when rates will be reduced.
The Fed has postponed a rate cut due to persistently high inflation. When inflation falls closer to 2%, the Fed is more likely to cut rates. A large majority of Federal Reserve officials said the central bank is likely to cut rates slightly in September, according to minutes from its July policy meeting.
“Our restrictive monetary policy has helped restore the balance between supply and demand, easing inflationary pressures and keeping inflation expectations well anchored,” Powell said.
With inflation on track after a dip earlier this year, Americans can expect rate cuts soon. These cuts affect financing costs for mortgages, cars and student loans, among other things.
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Consumer confidence is stabilizing
Consumer confidence about the economy has stabilized over the past month, indicating that Americans are slightly more positive about the state of the economy than they were a few years ago. In August, sentiment rose 2.1%, meaning sentiment remained about the same for the fourth month in a row, PYMNTS reported.
The future economic outlook has not remained as stable, but is shooting to a five-month high, largely due to the election season. Election years don’t tend to change current economic sentiment, but they can influence Americans’ future thoughts about where the economy is headed.
“Survey responses generally include who consumers currently expect the next president to be,” explains Joanne Hsu, director of the University of Michigan Surveys of Consumers. “Some consumers note that if their election expectations do not materialize, their expected trajectory of the economy would be very different.”
The increase in consumer confidence for the future is partly due to the fact that Democrats have more confidence in the new Democratic presidential candidate, Vice President Kamala Harris. Lowering inflation has also helped improve the outlook, PYMNTS reports.
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