The recent job gains reported on June 7, 2024, come with a mixed bag of good and bad news. Despite the positive increase in payrolls, there are concerning factors in the May jobs report that indicate a more opaque economic outlook. The state of the economy is under scrutiny as Americans and the Federal Reserve seek clear-cut data on the current situation.
Economist Dean Baker highlighted the complexity of the situation, stating that while a surge in jobs is positive, other elements of the report, such as slower GDP growth, reduced spending, and increased credit card delinquencies, paint a less optimistic picture. Chief economist with KPMG, Diane Swonk, reiterated this sentiment in an interview with CNN, noting that the rise in unemployment to 4% and accelerated wage gains are areas of concern.
The unemployment rate has climbed to 4% from 3.9%, marking the first time in over two years that it is no longer below 4%. Additionally, strong wage gains for the month have pushed average hourly earnings up by 4.1% over the past year, reversing a trend of cooling that had been observed for months.
Swonk pointed out that the service sector is experiencing significant wage increases, which can contribute to inflationary pressures. This poses a challenge for the Federal Reserve, as they may need to see offsetting decreases in goods prices to combat rising inflation in service sector areas such as personal care services, cleaning, and vehicle maintenance. Dealing with stubborn inflation in these areas may require consistent efforts to address the root causes of price increases.