Economics Weekly May 6, 2024
The Jobs market slowed in April
Last week saw data released that pointed to a deceleration for the labor market, something that will be welcomed by rate setters at the Federal Reserve. The number of job openings fell from 8.8 million in February to under 8.5 million in March. Additionally, growth in non-farm payrolls in April was 175,000, which was down from 315,000 in March and well below Wall Street’s forecast of 243,000. The unemployment rate increased to 3.9%, up from 3.8% from the previous month. On a more positive note, the number of job cuts was down from 90,300 in March to 64,800 in April. With the Fed delaying rate cuts, many firms are facing high interest repayments on their debts, and reducing staff numbers is one option to save money. Particularly for many office-occupying industries, outside of real estate, wages are often by far the biggest single cost for companies.
As was widely anticipated, the Federal Reserve left the Funds Rate unchanged last week, and hinted that a cut was some way off, citing “a lack of further progress” on returning inflation to the 2% target. However, Fed Chair, Jay Powell, poured cold water on talk that a rate hike might be in the pipeline; something a minority of investors had begun pricing in recently. While some commentators, like Oxford Economics, are predicting the first interest rate cut might occur in September, we believe that the Fed may prefer to avoid a month when the general election will be hotting up and a rate cut might become politicized. So, we are forecasting November, when the Fed rate announcement is scheduled for the day after polling day.
This week will see the release of data that will tell us more about the strength of the consumer. On Tuesday figures are published on consumer credit, such as auto loans and spending on credit cards, and we are forecasting an increase. On Friday the University of Michigan releases its consumer sentiment survey. Evidence consumers are becoming more confident and spending more will be good news for retail real estate, such as shops and malls.
Things to watch for this week
Tuesday, May 7th
Consumer Credit Growth, March
Previous: $14.1bn
Forecast: $14.9bn
Given consumer confidence has been relatively high in recent months we are forecasting spending on credit to have strengthened in March.
Friday, May 10th
University of Michigan Consumer Sentiment Survey, May
Previous: 77.2
Forecast: 77.9
Given the economy remains generally robust and unemployment is low by historic standards, we believe consumer confidence has improved.