Real hourly compensation has decreased by 4.4 percent since January 2021, according to revised data from the Bureau of Labor Statistics. Labor productivity and unit labor costs increased less than initially estimated in the first quarter of 2024. Worker productivity grew at an annualized pace of 0.2 percent, down from the previous forecast of 0.3 percent. Unit labor costs also rose by 4 percent, adjusted from the initial 4.7 percent reading. Wage growth figures were revised across the board, with real hourly compensation in the manufacturing sector showing negative growth. Overall, real hourly compensation has been down 4.4 percent since January 2021. Additionally, real median weekly earnings have decreased by about 2 percent over the past three years, and real personal income has dropped nearly 6 percent. Real personal disposable income, adjusted for inflation and taxes, decreased by 0.1 percent.
The Bureau of Economic Analysis revised down consumer spending in the first quarter in its second GDP estimate.
The Atlanta Fed GDPNow Model predicts second-quarter growth to be 2.6 percent, with the forecast being revised multiple times.
A potential slowdown in economic conditions may be welcomed by the Federal Reserve during the current tightening cycle.
The decision to cut interest rates further may hinge on the upcoming Consumer Price Index (CPI) report.
Inflation progress has slowed this year, with the annual inflation rate remaining above 3 percent.
The Cleveland Fed’s Inflation Nowcasting model anticipates the CPI to stay at 3.4 percent.
Core CPI, excluding energy and food sectors, is also expected to remain unchanged at 3.6 percent.
Fed officials have indicated they will wait for additional inflation data to determine if they are closer to reaching the 2 percent target.
Speculation arises as the Bank of Canada and the European Central Bank have already implemented a quarter-point rate cut before hitting this target.
Currently, the futures market is predicting a 25-basis-point reduction at the September policy meeting, according to the CME FedWatch Tool.
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