The Job Market Rarely Rebalances Painlessly


The Job Market Rarely Rebalances Painlessly By Hardika Singh

Fed officials say they can take their time to cut interest rates so long as the labor market stays healthy. But the job market rarely rebalances painlessly. Meanwhile, the Fed’s preferred inflation gauge rose 2.6% in May from a year ago, a sign that price pressures could be moderating. And the Biden administration took a long-delayed step against tax evasion in cryptocurrency markets. Read on for this news and more.

Top News Even a Slowly Cooling Labor Market Often Ends With a Recession

Recently the labor market has cooled, and indeed, looks like something close to normal. Unemployment has crept up from a half-century low of 3.4% a year ago to 4% in May, consistent with what economists consider full employment. The Labor Department releases June data Friday.

The question now is whether the labor market is in a sustainable equilibrium where unemployment settles out around 4% or keeps softening, resulting in recession-as historically has occurred when unemployment rises much more than it already has.

Pro Take: Postpandemic Hiring Boom Brings In Black Workers

The economic recovery from the pandemic did more than lead to record corporate profits and fuel high stock prices. It also helped create a tight labor market that lifted up economically vulnerable groups . One beneficiary: Black men without college degrees who entered the labor force by the hundreds of thousands as companies boosted wages and hired like crazy.

U.S. Economy Core Inflation Gauge Hits Lowest Increase Since 2021

The personal-consumption expenditures price index, or PCE, was in line with expectations of economists polled by The Wall Street Journal. The month-ago reading was 2.7%. The keenly eyed core index rose 2.6%. That was also in line with expectations and down from 2.8% a month ago. It marked the lowest increase since 2021.

Financial Regulation Crypto to See Tighter Tax Rules Starting in 2026

The Treasury Department adopted a final rule Friday requiring many cryptocurrency platforms to report information about their users’ transactions to the Internal Revenue Service.

Officials say the measure should deter tax evasion by making it clear to would-be miscreants that the IRS knows how much they owe. The adopted rules include several carve-outs requested by crypto lobbyists who complained of overly burdensome regulation.

Forward Guidance Monday (all times ET)

9:45 a.m.: Manufacturing PMI

10 a.m.: Construction spending

10 a.m.: ISM Report On Business Manufacturing PMI

Tuesday

9:30 a.m.: Fed Chair Jerome Powell speech in Portugal

10 a.m.: Job Openings & Labor Turnover Survey

Research Energy, Public Sector Keeping Canada Economy Afloat

Canada’s monthly GDP data for April shows that for over the past year, commodities and the public sector have kept the country’s economy afloat. Overall, Canada’s industry-level GDP, which excludes consumption and investment, rose 1.1% in April over a 12-month period. Among the biggest drivers was oil-and-gas extraction, up 5.3%; mining, up 2.4%; and the public sector, up 3.5%. This offset year-over-year declines in manufacturing and construction, and weakness in the retail sector. Economists have warned about the growing size of Canada’s public sector, where employment climbed in May 4.8% on a 12-month basis, outpacing job creation in the private sector. – Paul Vieira

Basis Points Governments should cut back on borrowing to ease one of the biggest threats to the stability of the global financial system and support efforts to tame inflation, the Bank for International Settlements said Sunday. – Enes Morina and Paul Hannon Big banks plan to pay out more to shareholders after passing regulators’ annual stress test results earlier this week. The stress-test exercise measured the 31 biggest banks’ ability to maintain strong capital levels in a hypothetical recession. – AnnaMaria Andriotis and Alexander Saeedy The Securities and Exchange Commission on Friday sued crypto firm Consensys Software , alleging that it violated rules that require it to register as a broker and illegally sold securities. – Vicky Ge Huang Lumber prices have tumbled into building season, a sign that residential construction and home-improvement markets are buckling under high borrowing costs . – Ryan Dezember Canada’s economy looks to have lost momentum again after a rebound in April, pointing to a soft backdrop that could help keep inflationary pressures in check and leave the door open to further rate cuts this year. – Robb M. Stewart French stock markets, government bonds and the euro rallied amid expectations of a French cross-party alliance to deny the far-right an overall majority in the second round of the French election. – Cristina Gallardo European banks’ efforts to narrow the once-significant valuation gap with their American peers have faced what many analysts expect will prove to be a temporary setback . – Elena Vardon and Helena Smolak Sentiment among large Japanese manufacturers improved during the three months to June, adding to expectations for interest-rate increases by the Bank of Japan. – Megumi Fujikawa China’s manufacturing sector stayed in contraction for a second consecutive month in June, underscoring the difficulties the world’s second largest economy faced after Beijing’s efforts to resuscitate its property sector. – Singapore Editors A private gauge showed China’s factory activity expanded at a faster rate in June, contrasting with the official index remaining in contractionary territory. – Singapore Editors About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [hardika.singh@wsj.com].

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

07-01-24 0715ET



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