Regional Fed survey reveals risks in the job market, further strengthening expectations of a Fed rate cut
Regional Fed surveys show risks in the US job market, hinting at a possible rate cut by the Federal Reserve. The latest report indicates that employment indicators in both manufacturing and services sectors are declining, with factory employment decreasing for three consecutive months and service industry experiencing job shrinkage as well, along with a decrease in working hours. Consumers generally feel an increase in job search difficulty, which may lead to a rise in layoff risks. The overall situation suggests signs of a slowdown in the labor market, becoming a focal point for policymakers
Intelligent Financial APP noticed that the employment indicators in the latest round of surveys by the Federal Reserve regional banks reflect the risks facing the US job market, implying that the Fed will shift towards rate cuts.
The indices for August in the five recently released regional manufacturing reports all show a decrease in factory employment numbers, with the employment indicators for service providers also falling. The work hours index is also declining.
These surveys are more about measuring industry confidence rather than actual employment changes. However, with disappointing job growth in July and other data showing a significant downward revision in employment numbers in March, these surveys provide signs of a slowdown in the labor market, which Fed Chairman Powell stated is a focus of policymakers.
In terms of manufacturing, the index from the Kansas City Fed shows that employment numbers have shrunk for the first time in three consecutive months since mid-2020, while the Richmond Fed's index is the weakest since 2009 apart from the pandemic.
August manufacturing employment index remains in contraction territory
In the service and other non-manufacturing sectors, the Philadelphia Fed reported the largest monthly decline in full-time employment in over four years. The Richmond Fed's employment index shows consecutive months of contraction for the first time since 2020.
Despite showing signs of stabilization after a three-year decline, the Dallas Fed's index indicates that employment for Texas service providers has actually stalled over the past two months. In New York State, the index for August has declined for the first time since the beginning of this year.
Americans themselves are also noticing increasingly limited job opportunities. A report released by the Conference Board on Tuesday showed that the proportion of consumers who say jobs are hard to get reached the highest level since March 2021 this month.
Philadelphia and Richmond Fed indices show decreasing employment numbers
According to regional surveys, factory workers' work hours are also generally decreasing. In New York, the reduction in manufacturing work hours reached the highest level in over a year. Indices from Texas, Philadelphia, and Kansas City regions also indicate an extended period of reduced weekly work hours, increasing the risk of layoffs.
Based on the Kansas City Fed's manufacturing survey, about one-third of surveyed companies expect to employ fewer workers by the end of 2024 compared to the beginning of the year, while half of the companies state that their plans will remain unchanged This region includes parts of Colorado, Kansas, Nebraska, Oklahoma, Wyoming, as well as western Missouri and northern New Mexico. A manufacturer stated, "Everything changed in July. We caught up with production, but orders were also delayed. Last week, we laid off 30% of hourly workers."
Another company in the region mentioned, "Our industry has declined by 20-35%, posing a challenge for our sales department and maintaining staff."