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Recent Data Points to Further U.S. Economic Moderation
September 4, 2024
The summer ended with a raft of potentially worrying signs that point to a moderating economy, complicating matters for Federal Reserve policymakers.
U.S. manufacturing activity contracted in August. The Institute for Supply Management (ISM) monthly survey of purchasing managers showed that just 47.2% reported expansion during the month. A reading below 50% indicates a contraction in the sector.
While the reading was an improvement from July’s, it was below the 47.9% that economists polled by Dow Jones had expected. The ISM report noted that demand continued to be weak and output declined. They also pointed out that while a reading below 50% indicates a contraction in the manufacturing sector, any reading above 42.5% generally points to an expansion across the broader economy.
The report came on the heels of the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) report for July, which showed job openings fell to the lowest level in nearly 4 years.
The number of available positions fell to 7.67 million during the month. That is down 237,000 from the month prior and is the lowest since January 2021. The decline brings the ratio of available jobs to job seekers down to roughly 1-to-1. That’s about half of where it was at its peak of more than 2-to-1 in early 2022.
The report showed just how much the labor market has tightened and provides further ammunition for Fed policymakers to cut interest rates at their policy meeting next week. A rate cut is all but certain, the markets are split on whether we will see a 25 basis point cut or a larger half-percentage point cut.
