The US economy is still in growth mode – but it may be losing steam

The number of available jobs in the US unexpectedly grew in May, signaling continued resilience in the labor market despite the negative pressure applied by high interest rates, according to Bureau of Labor Statistics data published yesterday.

• The Bureau found that US job openings, a measure of labor demand, rose by 221,000 in May to reach 8.1 million.
• Prior to the report, economists polled by Reuters and Bloomberg had forecast job openings to remain steady in May at a three-year low of ~7.9 million.

Zoom out: The data marks the latest evidence that America’s job market and overall economy have remained strong in the face of the Federal Reserve’s recent interest-rate hikes, which typically suppress job creation and economic growth.

Lately, however, there have also been signs both areas are losing some steam:

• There are currently 1.22 jobs for every unemployed American, down from a record 2-to-1 ratio in January 2023; overall job openings have decreased by a third since peaking at 12.2 million in March 2022.
• From January through March this year, the economy grew at an annual pace of 1.4%, its slowest rate since Q2 2022.
• Consumer spending, which accounts for ~70% of US economic activity, grew 1.5% in Q1 2024 after advancing at a pace of 3+% in Q3 and Q4 of last year.

Looking ahead… The Fed is widely expected to begin cutting interest rates sometime later this year, a move that typically results in higher economic growth and more job creation – though Fed officials say future rate cuts are contingent on inflation (currently 3.3%) continuing to approach the central bank’s long-term target of 2.0%.

📊 Flash poll: To all working professionals: would you consider the growth outlook in your industry/sector of the economy to be positive or negative over the next 12 months?

• Positive
• Negative