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Next week's economics: 4-8 July

Expect little change in US unemployment but more signs of a retail slump
June 30, 2022

The ominously-titled BLS report on The Employment Situation is out on Friday 8 July. Last month’s release reported low US unemployment at 3.6 per cent, but showed employment growth cooling slightly. Expect little change in June: the Fed’s latest summary of economic projections forecasts 3.7 per cent unemployment, with a possible range of 3.2-4 per cent for the rest of the year. 

Average (non-farm) hourly earnings for all employees rose by 10¢ over May – a meagre 0.3 per cent increase. Real earnings for June 2022 are next week’s excitement (the BLS will release figures on 13 July), but the employment report will provide updated hourly earnings figures for June in the meantime. With CPI inflation running at 8.6 per cent, expect earnings growth to continue to lag behind inflation this month – despite the tight labour market. 

Although the overall US labour market remains buoyant, jobs in retail declined in May, dropping by 61,000 over the month. The majority of these job losses were in general merchandising stores, but clothing and clothes accessories stores alone shed 9,000 workers. Could this be a sign of consumers cutting back as the cost of living soars? 6 July’s services ISM report will provide further insight into the health of the retail sector: it was, tellingly, one of only a handful of industries to see a decrease in business activity in last month’s release. 

The services report will also provide valuable price information ahead of the following week’s US CPI figures. The services PMI hit a record high in April and, despite a dip in May, remains at very elevated levels. Prices will continue their upwards march this month, but the rate of increase should decelerate. Forecasts also suggest that we might see a dip in overall service sector economic activity next month, as the conflict in Ukraine, labour availability and soaring prices continue to weigh on firms. 

Closer to home, 7 July will see updated UK house price data from the Halifax House Price Index. While house prices rose in May, growth had slowed to a crawl. Still, this was little comfort for first-time buyers, who faced yet another month of record house prices. Anticipate more signs of a cool-off in June, with Halifax expecting lower mortgage activity and inflationary pressures to dampen demand.