The question is not whether the Fed will cut interest rates at its next policy meeting, it is by how much.
Noah Yosif
Weekly Economic Outlook
09/10/2024
25 or 50? The Case for a Larger Cut by the Fed
There was not much for markets to love about the latest job numbers. The Job Openings and Labor Turnover Survey, or JOLTS report, from the U.S. Bureau of Labor Statistics, fell short of expectations. Total nonfarm payrolls dropped to just 142,000 while gains in June and July were revised down by 86,000. And job openings dropped to their lowest levels since January 2021. In addition, the latest ADP Employment Report, from Automatic Data Processing Inc. and Stanford Digital Economy Lab, offered a similarly grim assessment of private payrolls—which also fell to their lowest level since January 2021. The question is not whether the Fed will cut interest rates at its next policy meeting, it is by how much.
There are several reasons why the Fed can and should consider a larger cut. First, monetary policy lags are highly variable, which means the Fed could risk additional scarring in the labor market as employers wait for borrowing costs to recede before adding headcount or suspending layoffs. Next, capital spending remains laggard. Multiple manufacturing surveys suggest an elongated timeline for a rebound in goods-producing sectors that have already been uniquely challenged by tightening labor market conditions. And finally, labor incomes are receding which means today’s consumption is a product of yesterday’s wages. This is particularly evident by a drop in the personal savings rate, which means that consumers may risk debt or delinquency to maintain current levels of spending.
The Fed spent the better part of a year carefully accumulating the flexibility to adjust monetary policy as economic conditions evolved. It would do well to utilize that flexibility by enacting a 50-basis point cut in September and focusing more on the employment side of its dual mandate.
Consumption Today Is Being Financed by Savings From Yesterday
Source: Bureau of Economic Analysis, U.S. Department of Commerce
Weekly Staffing Research Outlook
09/10/2024
This slow recovery after the seasonal dip is in part representative of the staffing industry’s performance so far in 2024—a largely muted one.
Max Aldrich
Staffing Index Shows Sluggish Rebound After Midyear Dip
This year, the ASA Staffing Index took around twice as long to return to pre-July 4th levels compared to 2022 and 2023, taking almost two months to fully recover in contrast to only three to four weeks in previous years. This slow recovery after the seasonal dip is in part representative of the staffing industry’s performance so far in 2024—a largely muted one.
A cooling labor market and low labor turnover are the likely culprits that extended this year’s recovery time. As both declining levels of job openings and hires have led to less labor demand, and a largely flat level of job separations shows that workers have not been confident enough to risk leaving their jobs for new opportunities.
Additional upcoming seasonal downturns are unlikely to see the Staffing Index rise above its current steady state value of 90. However, with interest rates scheduled to start falling this month, the subsequent uptick in economic activity will cause the labor market to reverse its cooling as more jobs are created and workers regain the willingness to seek alternative employment. Staffing companies can expect the industry to be in a much better position going into 2025 once the effects of rate cuts permeate throughout the economy.
Staffing Took Twice as Long to Recover in 2024
Source: ASA Staffing Index, American Staffing Association
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