10

June 2024

Market News Macro Economic Insights

US unemployment rate rises to 4%

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Adriaan Pask

Chief Investment Officer, PSG Wealth

Event
  • The US economy added 272 thousand jobs in May 2024, while the unemployment rate rose to 4% y/y, the highest reading since January 2022.
  • The number of unemployed people rose by 157 thousand to 6.6 million, while the number of employed individuals fellby 408 thousand to 161.083 million.
  • The U-6 unemployment rate, which also includes people who want to work, but have given up searching and those working part-time because they cannot find full-time employment, remained unchanged at 7.40% in May 2024.
The Impact
  • Following the release of a stronger-than-expected US jobs report, Wall Street declined on Friday, with all three major averages shedding about 0.30% each. This led traders to scale back bets that the Federal Reserve (Fed) would soon cut interest rates.
  • As a result,the USDollarIndex (DXY)surged over 0.50% to reach 104.7 points on Friday afternoon.
  • The US 5-year and 10-yearTreasuryyielddeclinedto4.42%and 4.40%,respectively, whilethe30 year Treasury yield rose to 4.53%at 15h30 on Friday.
  • Meanwhile, the FTSE/JSE All Share Index (ALSI) finished approximately 0.40% down at 76 852, following a volatile session on Friday. Investors digested the latest US jobs report while keeping an eye on South Africa's political developments.
  • Labour force participation comparison between May 2024 and April 2024
  Latest Previous Change
Population (US Bureau of Labour Statistics  268.248 million 268.066 million 182 thousand increase
Labour force participation rate (Proportion of the working age population either employed or unemployed) 62.50% 62.70% Fell by 0.2 percentage point. 
Employment-population ratio 60.10% 3.90% Fell by 0.1 percentage point 
Unemployed  4% 3.90% Rose by 0.1 percentage point
Not in labour force  100 516 100 083 Increased by 433

Source: US Bureau of Labour Statistics

The Assessment
  • Employment numbers remain relatively strong, and the consumer is generally seen to be in good shape.
    Therefore, we have seenmarkets pull back their expectationsfroma forecasted six cuts forthe yearto three currently.
  • As it stands, the likelihood of a Fed rate cut in September has declined from 68% to 55% following the data release.
  • As it stands, the likelihood of a Fed rate cut in September has declined from 68% to 55% following the data release.
  • We are mindful of the impact of a very tricky interest rate cycle, inflation and employment numbers on our portfolios and continue to monitor these events closely.
  • The next US unemployment rate release date is scheduled for Friday, 5 July 2024