US Consumer, Manufacturing, and Employment 'Triple Weakness'... Economic Downturn or Goldilocks?

8.05 Million Job Openings in April... Lowest in 3 Years
Labor Market Cools Amid Consumer and Manufacturing Slowdown
Rising Expectations for Interest Rate Cuts Amid Economic Downturn Concerns

The number of job openings in the U.S. decreased for the second consecutive month in April, hitting the lowest level in three years. Signals of economic slowdown are being detected across the board, from weak consumer and manufacturing activity to a cooling labor market. As employment, which had supported inflation overheating, cools down, expectations for interest rate cuts are rising. The market is closely watching whether the U.S. economy will enter a full-fledged downturn or continue in a 'Goldilocks' phase that is neither too hot nor too cold.

According to the Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Department of Labor on the 4th (local time), the number of job openings in April was recorded at 8.059 million, the lowest level since February 2021. This figure not only fell short of market expectations (8.37 million) but also decreased compared to the previous month (8.355 million).

By sector, the healthcare and social assistance sector led the decline in job openings with a decrease of 204,000. Job openings in state and local government education also fell by 59,000. On the other hand, the private education services sector saw an increase of 50,000. The hiring rate slightly rose to 3.6% from 3.5% in the previous month. The voluntary quit rate also edged up to 2.2% from 2.1%.

With U.S. job openings declining for two consecutive months to the lowest level in three years, the labor market is gradually cooling down. As the labor market, which had fueled inflation overheating, cools, inflationary pressures are expected to ease, increasing the likelihood that the Federal Reserve (Fed) will cut benchmark interest rates. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on this day reflected over a 66% probability that the Fed will cut rates by at least 0.25 percentage points at the September Federal Open Market Committee (FOMC) meeting. This is up from the 59% range a day earlier and 45% a week ago.

Ronald Temple, Chief Market Strategist at Lazard, analyzed, "Evidence is accumulating that the Fed needs to start easing."

Due to the cumulative effects of the Fed's high-intensity tightening, signs of economic downturn are appearing in various areas. The day before, the Institute for Supply Management (ISM) released the May U.S. Manufacturing Purchasing Managers' Index (PMI), which came in at 48.7, below both the expert forecast (49.8) and the previous month's figure (49.2). A manufacturing PMI below 50 indicates contraction, and the U.S. manufacturing PMI has been in a contraction phase for two consecutive months. However, on the same day, S&P Global's May manufacturing PMI was 51.3, indicating expansion and exceeding expectations, showing mixed signals in the indicators.

Consumer spending slowed. According to the U.S. Bureau of Economic Analysis (BEA), real personal income and real personal consumption, adjusted for inflation, both decreased by 0.1% in April compared to the previous month. Consumption accounts for two-thirds of the U.S. economy and is considered a barometer of economic health.

With manufacturing, consumption, and now employment indicators showing signs of slowdown, investors are cautiously watching whether the U.S. economy will continue in a Goldilocks phase or enter a full downturn. The market currently judges that the employment situation is not cooling enough to raise recession concerns. The New York Stock Exchange fell the previous day due to fears of economic downturn triggered by weak manufacturing data, but on this day, investors responded more to expectations of interest rate cuts than to the possibility of economic slowdown, closing slightly higher.

The market is focusing on the May nonfarm payroll report from the Department of Labor, to be released on the 7th, for further clues on the U.S. economy and interest rate outlook. May nonfarm payrolls are expected to increase by 185,000 compared to the previous month. In April, the increase was 175,000, below the forecast of 243,000. If the overheated labor market calms down, consumption slowdown and inflation decline could accelerate.

Bank of America (BoA) commented, "If job gains remain between 125,000 and 175,000, it falls within the Goldilocks range, but if it falls below that, the possibility of a recession could become more pronounced," adding, "It is important for the economy to maintain steady growth without fueling inflation." Tom Essaye, founder of The Sevens Report Research, forecasted, "If Goldilocks indicators emerge, it will help stabilize the stock market, which experienced increased volatility last week."

This content was produced with the assistance of AI translation services.