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Hints of Slowing Growth

Economic Observer: Up-to-date information on the latest financial news

Overview: The economic data released over the past week suggested that economic growth may be slowing a bit. While job gains remained solid, the other labor market, services, and manufacturing data was less upbeat. As a result, mortgage rates ended the week a little lower.


The economy added 206,000 jobs in June, close to the consensus forecast. Some of the sectors with the largest gains included healthcare, construction, and government. A bigger surprise was that the unemployment rate rose from 4% to 4.1%, the highest level since October 2021. The data on job gains comes from actual figures provided by large companies, while the unemployment rate is based on a household survey conducted by the Labor Department. Although these two sources show similar results in the long run, it is common for them to display different levels of strength from month to month. Average hourly earnings, an indicator of wage growth, were 3.9% higher than a year ago, down from an annual rate of 4.1% last month and the lowest level since May 2021.


Two other significant economic reports from the Institute for Supply Management (ISM) revealed unexpected weakness. The ISM Services Index dropped to 48.8, far below the consensus forecast and the lowest level since May 2020. The ISM Manufacturing Index dropped to 48.5, a little lower than expected. Since readings above 50 indicate an expansion and below 50 indicate a contraction, these reports suggest that both sectors are slowing modestly.

In recent comments, Federal Reserve Chair Jerome Powell and other officials have delivered a similar message regarding inflation and future monetary policy. Powell said that the Fed has made “quite a bit” of progress, but officials still want more confidence that inflation is “moving sustainably” back down toward their 2% target before loosening monetary policy (meaning cutting rates). Officials also have stated that the risks of lowering rates too soon and triggering higher inflation, or waiting too long and needlessly restricting economic growth, are in better balance this year.


Job Gains (thousands)

Chart of Job Gains in thousands from October 2023 to June 2024


Week Ahead

July 11

Consumer Price Index (CPI)

July 12

Producer Price Index (PPI)

July 16

Import and Export Price Indexes

Retail Sales report

July 17

New Residential Construction report (also known as Housing Starts)


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