Jackson Hole Ahead, But What About Payrolls and Tariffs

The stock market will be focused on Fed Chair Powell's talk at the Jackson Hole Conference this week, looking to see whether he indicates a rate cut at the September FOMC Meeting is likely.  The Fed often has used this Conference to signal shifts in policy.  

The US economic data released since the July FOMC Meeting, however, has not been fully supportive of a rate cut.  The labor market has weakened a bit, seen by slightly higher Initial and Continuing Claims so far in August than in July.  While the large downward revisions in May-June Nonfarm Payrolls and modest increase in July painted a weaker picture of the labor market than did earlier data, the important Unemployment Rate remained in its low range.  Moreover, inflation has picked up, only in part a result of tariffs.  If Powell shifts away from a "wait and see" policy approach toward an easing, he probably will have had to canvass other FOMC members informally beforehand.  Keeping the "wait and see" approach while leaving open the door for an easing may be the most likely message in his speech.  Stocks may be disappointed with it, but any selling would probably be short-lived. 

Besides Fed policy, measurement of BLS Nonfarm Payroll data and the question of tariffs should continue to be a market focus.  Here are some thoughts regarding these issues: 

Accuracy Versus Timeliness in Payroll Report

Trump and his candidate to head the Bureau of Labor Statistics (BLS), E.J. Atoni, complain about the inaccuracy of the Nonfarm Payroll data.  There are two reasons why the Payroll data get revised each month.  First, BLS receives more survey responses after the first release.  Typically, about 2/3 of respondents file in time for the first Payroll release.  About 90% of respondents have filed by the time of the second revision.  Second, the seasonal adjustment process spreads some of the strength or weakness of the current month's Payroll data over the prior two months.  Their complaint focuses on the first reason.

Besides the monthly revisions, there is an annual benchmark revision.  The latter matches the level of March Payrolls in the latest year with the level measured by Unemployment Insurance data, which is not subject to sample error.  BLS will release an estimate of the benchmark revision to March 2025 on September 9.   

The trade-off between accuracy and timeliness in the Nonfarm Payroll data centers on whether a high degree of accuracy is more or less important than the usefulness of a timely print.  The US had decided that usefulness is more important, hoping that the estimation procedures to fill in for missing respondents will succeed for the most part in producing a near-accurate total.  The degree of success that it has had is debatable  The absolute average revision from the first to third print is 57k between 1979 and 2003 and 51k between 2003 and 2025.  In other words, a 100k first-print Payroll m/m increase, will likely end up about 50k or 150k after the two monthly revisions.  This could be important.  There has been more than one episode when Fed monetary policy would have differed if revised Payroll data had been the first print.

Trump's candidate is reported to have argued for the Payroll data to be released quarterly, presumably at the end of the subsequent quarter in order to get most of the responses for the third month of the prior quarter.  Doing so will likely make other labor market data more important for the markets and Fed.  These include the ADP Estimate and Unemployment Claims.  The latter is a universal count and not subject to sample error.  The BLS Household Survey presumably would remain monthly, since the data coming out of it, particularly the Unemployment Rate, is not revised.  Knowing the Unemployment Rate might be enough, since it would show (by decreasing or increasing) whether Payrolls are rising above or below trend.

Other US economic data could be difficult to measure without the monthly Payroll (and Average Hourly Earnings) data.   Labor Compensation in Personal Income is based on these data. 

 Trump's Tariff Policy And Causes Of Trade Deficit

Trump's tariff policy aims to shift production back to the US from abroad.  This shift will reduce the standard of living of the US, since it results in the loss of low-cost labor.  Domestic production is more costly than foreign production, otherwise domestic production always would have been dominant. 

Trump and others argue that foreign production is less costly because governments offer subsidies and hold down the value of the currency relative to the dollar.  The latter makes their exports cheaper in dollar terms, resulting in an on-going large trade deficit.  China is the main actor along these lines.  

There are others who argue that foreign governments are not the culprits behind the large US trade deficit. Instead, it is insufficient saving or over-consumption in the US.  This explanation carries a moral undertone, criticizing US behavior as spendthrift.  It implies that the US takes advantage of the global status of its currency to over-consume by running a perpetual trade deficit (perhaps underscored by the "strong dollar" policy of past Administrations). 

They base this argument on the national income identity that Domestic Saving equals Net Exports.  Negative Domestic Saving is associated with a Trade Deficit.  The Federal Fiscal Deficit is the main culprit of negative saving in the US.   If this is the real reason for the trade deficit (rather than the consequence of the actions of foreign governments), then Trump's tariffs are a clever way to solve the problem.  They increase US government revenue, regardless of who pays it, which increases national saving by reducing the Federal deficit.   And, they target and reduce the consumption of the goods (imports) that allow the US to over-consume.  

 

 

 

 

 

CPI, Labor Market and Compensation

The stock market rally should not be derailed if this week's inflation data match the consensus estimates.  Although consensus for the July Core CPI is a bit on the high side, it may be viewed by the market as not being high enough to worry Fed officials more than they already are.   The outcome of US/China tariff negotiations by the August 12 deadline could be more important.  Meanwhile, Unemployment Claims data may be adding to evidence of a softer labor market.

July CPI

Consensus looks for 0.2% m/m Total and 0.3% Core CPI for July, with the y/y edging up for both.  The estimate looks reasonable, with both upside and downside risk to Core.  Upside risk stems from a possibly bigger impact of tariffs than in June.  Also, seasonal factors switch to boosting from holding down some important components, such as Lodging Away From Home and Airfares.  And, New Vehicle Prices could move up as some discount programs ended.  Downside risk stems from a possible smaller impact of tariffs than in June and more discounting in response to soft consumption generally.  Also, Owners' Equivalent Rent could move down a bit from 0.3% to the lower 0.2% m/m trend seen in Primary Rent recently.

The market and Fed will probably be looking to see whether the components that seemed to be boosted by tariffs in June continued to rise sharply in July.  If they don't, the Fed's favorite view that the tariffs would only result in a one-time boost to prices would be supported.  This view is a reason why Fed officials would not be disturbed by a slightly high Core CPI.  From a market perspective, a consensus print would encourage expectations of a Fed rate cut at the September FOMC Meeting.

Unemployment Claims Data 

The latest Unemployment Claims data suggest a smaller increase in Payrolls in August than in July if Claims stay at these levels for the next few weeks.  Both Initial and, particularly, Continuing Claims are above their July averages in the latest week.

ADP Estimate Better Than Payrolls?

Aside from the inappropriateness of Trump's firing of the BLS director, the large revisions in Nonfarm Payrolls in May and June could make the markets pay more attention to the ADP Estimate of Private Payrolls.  The revisions brought the BLS prints significantly closer to the ADP Estimates for these two months (see table below).   

The ADP Estimate of August Private Payrolls will be released September 3 and the BLS Employment Report September 5.  The BLS estimate of the Payroll benchmark revision will be released on September 9.  The benchmark revisions will be incorporated into the Payroll data in the January Employment Report, due in February 2026.  

                                              Private Payrolls (m/m change, 000s)   

                        ADP Estimate        First-Print BLS        Latest-Print BLS         

    March               155                          209                            120

    April                   62                          167                            133

    May                    37                          140                              69          

    Jun                    -33                            74                                3                                    

    Jul                    104                            83                               83       

  Labor Cost and Productivity Data

The Q225 data on Productivity, Compensation/Hour, and Unit Labor Costs have mixed news for the economy and inflation fight:

 1. The trend in Productivity Growth is back to its modest pace of the 1990s.  Although it popped to 2.4% in Q225, it was largely a rebound from the -1.8% in Q125.  The volatility reflects the measurement problem stemming from the large swings in net exports in GDP.  The y/y of 1.3%, which eliminates this problem, is lower than the increases seen in 2024 and 2023 (see table below).  Adding the 0.4% trend in Population, trend GDP looks to be about 1.7%, at the lower end of the Fed's 1.7-2.0% estimate of longer-run growth -- a modest pace.

 2.  Compensation/Hour -- the broadest measure of labor costs -- rose about 4.0% both q/q (annualized) and y/y in Q225.  Both are below the paces seen in 2024 and 2023.  So, this is good news for the inflation fight and in line with the slowdowns seen in Average Hourly Earnings and Employment Cost Index.

 3.  Taking both Productivity and Compensation/Hour into account, however, the trend in Unit Labor Costs (Compensation divided by Productivity) has moved up.  The y/y increase was 2.6% in Q225, higher than the increases seen in 2024.  

From the Fed's perspective, the downtrend in Compensation/Hour suggests the Unemployment Rate is at a level that is holding down labor costs.  However, labor costs may have to move down even faster if the trend in Productivity, which the Fed has no control of, does not pick up. 

                                                             Q225                         2024        2023                                 

                                                    [ q/q % *    y/y %]         [Q4/Q4 % change]

Productivity                                    2.4           1.3                    2.7            1.9                                  

Compensation/Hour                       4.0           3.9                    5.2            4.2      

Unit Labor Costs                            1.6           2.6                    2.4            2.3      

 * annualized                           

             

A "Wait and See" Fed

The stock market will be entering the seasonally weak month of August amidst uncertainty about the next Fed move.  Fed Chair Powell said the Fed is in "wait and see" mode until the September 16-17 FOMC Meeting, waiting to see if upcoming data lean toward economic weakness or higher inflation.   

Powell said that monetary policy is balancing the risks attached to its two mandated targets -- Unemployment and Inflation, not GDP Growth.  So, the most important real-side data for the Fed will relate to the labor market -- particularly the Unemployment Rate.  On the inflation side, the Fed likely wants to see if tariffs boost prices just once and for all or trigger a cascading lift-off in prices.  

It is not clear that upcoming data will provide a clear enough picture for the Fed to change policy by the time of the September FOMC Meeting.  And, Powell may keep the balance of risks argument to keep policy steady then.  Arguably, the Fed is relying on a balance of risk reasoning to cover for its real concern about the politically sensitive inflationary consequences of the tariffs.  This concern would suggest a longer waiting period than just the time to the September FOMC Meeting.  

In any case, the July Employment Report may not have been weak enough to move the Fed toward an easing.  Although job growth remained below trend, the 4.2% Unemployment Rate stayed in its recent range and Total Hours Worked pointed to continued GDP Growth in Q325.  (Indeed, the Atlanta Fed Model's early forecast is 2.1% (q/q, saar) for Q325 Real GDP.)  Wage inflation was steady. 

Fed Chair Powell admitted that the US economy had slowed over H125.  However, he emphasized that despite the slowdown, the labor market remained solid -- evidenced by the still low Unemployment Rate.  To be sure, there could be a delay before slow GDP Growth results in an increase in the Unemployment Rate.  So, Powell risks being late in adjusting his view of the policy risks by downplaying GDP Growth. 

Nevertheless, steady Fed policy now may be appropriate because the underlying trend in GDP growth may have slowed.  So, what looks like weak growth, in fact, may be neutral.  From the stock market perspective, a slower trend in economic growth is bad for corporate earnings (a negative) but helps hold down longer-term yields (a positive).

The underlying trend in GDP Growth may have ratcheted down because Population slowed sharply, to 0.5% (annualized) over H125 from 0.8% over 2024 -- presumably because of the drop-off in immigration.  In terms of GDP, the slowdown in Population would need to be offset by increases in Labor Force Participation (share of population employed or unemployed and looking for a job) or a speedup in Productivity Growth to keep the trend in GDP Growth where it's been.  

A caveat: Labor Force Participation may be related to the strength of demand for labor.  When people see companies looking for workers, they may decide to enter or re-enter the labor force.  An increase in Participation would temporarily allow for a stronger-than-underlying pace of GDP Growth without sparking inflation.   Keeping monetary policy unchanged may not give this Participation response a chance to happen.   

Powell also may be too accepting of the 4.2% Unemployment Rate.  While the Unemployment Rate is historically low, it may be close to a level that could be viewed as dis-inflationary.  This is because wage inflation has been fairly steady.  Average Hourly Earnings rose 0.3% m/m on average in 3 of the past 4 quarters as well as in July.  The Employment Cost Index was steady at 3.6% y/y in Q225 but in a slight downtrend excluding incentive pay.  Compensation/Hour -- the broadest measure of labor costs -- will be released next week for Q225.  Nevertheless, a dis-inflationary level of the Unemployment Rate would be desirable if tariffs have more than a one-time impact on prices and would not argue for an easing in monetary policy.  Perhaps that is why Powell is satisfied with the level.

 

 

A Boost From The Fed?

The stock market may get a boost from the Fed this week, either by a rate cut at the FOMC Meeting or comments by Fed Chair Powell opening the door for a September ease at his post-meeting news conference.  The macroeconomic data, showing modest growth and low inflation, don't stand in the way of a cut.  In particular, the slow economic growth in H125 may be enough to prevent the tariffs from spurring a wage-price spiral.  Wage data so far don't show any sign of acceleration.  And, the trade agreement with the EU may very well remove any hesitation on the part of the Fed to ease this week.  The 15% tariff is much less than the 30% Trump had threatened, so the inflationary risks are lower, as well.

Trump's visit to the Fed was unfortunate, tainting a Fed rate cut with the suspicion that it is politically motivated.  However, regardless of whether the Fed decides to bend to political demands or to move independently because a rate cut is desirable, Trump's comments suggest that a policy easing either this week or September is in the cards.  He hinted that a rate cut is coming, saying he doesn't think firing Powell will be "necessary," since Powell "will do the right thing."  

The Fed probably doesn't believe the choice of a July or September rate cut would make much difference for the economy.  The lags between policy change and the economy are long.  There could be a different impact on the stock market, however.  A July cut could cushion or reverse the typical weakness seen in early August.  In contrast, postponing an easing to September could allow a seasonal decline in stocks in August.  However, prospects for a September cut would likely make any seasonal weakness short-lived. 

Key evidence  on the economy will be released after the FOMC Meeting, including the June PCE Deflator, Q225 Employment Cost Index, July Mfg ISM, and July Employment Report.  Consensus estimates would confirm that inflation is under control and economic growth is modest.

Consensus estimates 0.3% m/m for the June Total and Core PCE Deflator.  Such an increase is a little on the high side, but could be taken in stride after 0.1%  prints in the prior 3 months.  Also, a 0.2% increase in the June Core PCE Deflator can't be ruled out.  Nor could a steady 2.7% y/y be ruled out, which could be the case if the m/m rounds up to 0.3%.  Any revisions to past months could affect the y/y, as well.   

The other important inflation-related report this week is the Q225 Employment Cost Index (ECI).  Consensus looks for 0.8% q/q, down from 0.9% in Q125.  Recent history supports expectations of a slowdown in the ECI.  This is because Average Hourly Earnings (AHE) slowed this quarter and AHE and ECI moved in the same direction in each of the prior 3 quarters (see table below).  Indeed, recent history suggests the Q225 ECI could come in below consensus, since ECI rose be less than AHE in each of the past 3 quarters.

This week's real-side data are expected to improve a bit from the prior month, but the levels are expected to remain low and support the idea of modest growth.  Consensus looks for Consumption to bounce to +0.4% m/m in June from -0.1% in May.  But, in real terms (that is, adjusting for inflation) it would be up only 0.1% and stand slightly below the Q225 average -- a soft take-off point for Q325 Real Consumption.  Real Consumption looks to have risen about 1.5% (q/q, saar) in Q225, up from 0.5% in Q125 but still modest -- which Powell will play close attention to, since it is a major part of Private Domestic Demand that he likes to track.

Consensus expects Private Nonfarm Payrolls to climb faster in July than in June (consistent with the implication of the Unemployment Claims data) but to stay low.  It sees +86k m/m versus +74k, staying below the +115k pace associated with a steady Unemployment Rate.  Total Payrolls are seen slowing to +102k from +147k, as the June end-of-school-year bounce in State & Local Government jobs unwinds.  Other parts of the Report are expected to be supportive of a Fed ease, with the Unemployment Rate rebounding to 4.2% from 4.1%, AHE moving back to the 0.3% trend (after a low 0.2% in June), and the Nonfarm Workweek remaining at a low 34.2 Hours (prior trend was 34.3 Hours).

The July Mfg ISM is expected to continue to indicate a sluggish manufacturing sector.  Consensus sees an uptick to 49.6 from 49.0 in June.  

The US-EU trade agreement, as well as the other recent trade agreements, will probably take time to affect the US economy.  When the large increase in US exports and EU investments in plant and equipment do occur, the markets would likely move to crowd out other spending if the economy is operating near full employment.  The net result would be little change in GDP.  Ironically, despite Trump's desire for a Fed rate cut, the latter would make a full-employment economy more likely by the time the spending from abroad hits the US economy.  To be sure, rate cuts could just offset the drag from higher import prices stemming from the tariffs.  The latter are essentially consumption taxes.  It will take time to see how all the fall-out from tariffs materializes.

                             (q/q percent change)

                          AHE                        ECI 

Q225                0.8                            na                 

Q125                1.0                            0.9

Q424                1.0                           0.9                                                

Q324                0.9                           0.8    

Q224                1.0                           0.9                     

Q124                1.0                           1.2

 

 

                     

 

 

Low Inflation and Slow Economic Growth: Recipe For Fed Ease

The stock market may continue to move up slowly in the face of corporate earnings this week, as there is still time for a trade deal before the August 1 deadline.  Hope for a Fed rate cut at the July 29-30 FOMC Meeting is supportive of stocks, but it is still a long shot without there being a deal with a major trading partner.  A deal could free the Fed's hands, since the macroeconomic data support a decision to ease monetary policy.  

Although Fed Chair Powell maintains that inflation risks outweigh slow-growth risks stemming from Trump's tariff threats, the data released so far suggest the opposite.  Inflation remains subdued and Real GDP Growth was below trend in H125.  Powell has acknowledged the policy implication in a recent speech when he said the Fed would be easing were it not for fear of the inflationary impact of tariffs.  And, to be sure, bigger tariffs are threatened to be put in place on August 1 if trade deals are not made.

The Core CPI remained subdued at 0.2% m/m in June.  While some components posted large gains, very possibly a result of the tariffs, other components were soft and dominated the overall print.  News articles emphasized the increase in the y/y pace to 2.9% from 2.8%, but the uptick had more to do with the very low print in June 2024 than the trend-like print in June 2025.  The annualized m/m change was 2.8% in June and is in line with the Fed's Central Tendency Forecast for 2025.  Besides the direct impact of tariffs not dominating overall CPI inflation, the flat June PPI shows that domestic producers have not boosted prices to take advantage of tariff-impacted import prices.  The PPI measures prices charged by domestic producers, while the CPI measures prices faced by consumers.  The absence of secondary tariff-related price hikes by domestic producers should be a relief to Fed officials that the tariffs may very well have only a one-off effect on prices.

Besides the low inflation prints, a decline in inflationary expectations should please Fed officials.  Both the short- and long-term measures of these expectations in the University of Michigan Consumer Sentiment Survey fell in mid-July.  In particular, the 5-year longer-term expectations have fallen for three months from a peak of 4.4% in April to 3.6% currently.  It is now just above the 3.0-3.2% range of H224.  

One reason for inflation staying low may be the modest pace of wage inflation.  The latter could reflect in part subdued economic activity.  The Atlanta Fed Model estimates Real GDP Growth of 2.4% (qq, saar) in Q225 after -0.5% in Q125.  GDP in both quarters, however, were likely distorted by measurement problems arising from large swings in imports.  Government surveys tend to have trouble capturing the full impact of imports on domestic spending components of GDP.  So, the jump in imports in Q125 (in anticipation of tariffs) held down GDP, although in theory there should have been a corresponding offset in another GDP component.  And, the subsequent drop in imports appears to be boosting GDP Growth in Q225.  The 2-quarter average of Real GDP Growth, which cancels out this measurement problem, is 1.0% -- below the Fed's 1.7-2.0% estimate of long-term potential growth. 

The Unemployment Claims data are still diverging.  Initial Claims fell further in the latest week, while Continuing stayed high.  These data suggest that while companies have pulled back from firing workers, they are reluctant to hire.

 

CPI, Labor Market and Fed Monetary Policy

The stock market may trade cautiously as it moves into the corporate earnings season this week, with the softer macroeconomic background suggesting uneven reports (see the June 29 blog).  Moreover, tariff developments could keep the market on edge, as could Administration pressure on Fed Chair Powell to resign.  Nevertheless, there are reasons to be optimistic about the market.  Tuesday's June CPI Report could lift expectations of a Fed rate cut at the July 29-30 FOMC meeting.  A rate cut would likely still be a long shot, unless there is some pullback in announced tariffs.  Europe's decision not to retaliate at this point is encouraging that a trade deal will be reached before the August 1 deadline -- a market positive.  However, it remains to be seen whether this will be the case.

Consensus looks for +0.3% m/m for both June Total and Core CPI.  This would be a bit on the high side and not lift expectations of a near-term Fed rate hike.  A consensus or higher print would likely reflect some impact from tariffs.  Also, Airfares should not be as weak as in April and May, since seasonal factors turn neutral after depressing them in those months.  However, a lower print for Core can't be ruled out.  Owners' Equivalent Rent needs to stay low at 0.3%.  More generally, importers may have lowered prices to offset some of the tariff and maintain market share.  And, the subdued wage inflation in the US, as seen in the June Employment Report, could help hold down price increases.  

While a low CPI print could fan expectations of a near-term Fed rate cut, the latter is still probably a long shot.  The June FOMC Minutes indicated only a couple of participants considering a July easing.   Most of the FOMC members were focused on inflation risks stemming from tariffs.   And, Trump's latest spate of large tariff announcements could make these members even more concerned.

The latest Unemployment Claims data have mixed implications about the labor market, but are not likely to concern Fed officials.  Initial Claims remain below the June average for the third week in a row, suggesting a pullback in layoffs.  In contrast, Continuing Claims are still high, suggesting that companies are reluctant to hire.  Uncertainty about the impact of tariffs could be weighing on hiring decisions. 

Despite the divergence between Initial and Continuing Claims, if both stay at their latest respective levels for the next few weeks, they would point to a speedup in July Payrolls -- outside of government jobs, which could drop as state & local education jobs unwind their June jump and some of the Trump cuts in federal government jobs show up.  Although the July Employment Report will be released after the next FOMC Meeting, the current levels of both types of Claims are probably not high enough to change the Fed's view of a solid labor market.  

Looking ahead, the imposition of tariffs could have two, opposite impacts on the labor market.  Relocation of US production from abroad should boost demand for labor.  However, the drag on demand for goods and services from higher prices should depress it.  The latter could have the more immediate impact, since it takes time to shift production to the US.  Another major factor whose impact on labor demand is likely to increase over time is the substitution of AI for workers.  So far, there is anecdotal evidence that this is happening.  The negative impacts on the labor market from these two channels could result in Fed easing at some point.

Away from the economy, a possibly significant hit to the stock market would likely result if Trump succeeds in removing Powell from the Fed Chair.  The "manufactured" controversy over the Fed's new headquarters could be the catalyst.  With a new Trump appointee expected to be quicker to cut rates, longer Treasury yields should rise and the dollar fall.  The former, particularly, would hurt stocks.

  

 

 

 

 

 

 

 

 

 

 

 

Misleading Tariff Deadline (?) and June Employment Report

The stock market has to contend this week with the July 9th deadline for trade negotiations.  However, there are a couple of reasons why a pullback could be modest.  First, Trump has said this deadline is not set in stone.  And, the Administration will be sending letters to some countries threatening an August 1st implementation of high tariffs if there is no trade agreement in place by the deadline.  This threat could keep alive hope for a market-positive resolution in July.   Second, the June Employment Report in fact should sustain hope for a Fed easing that should continue to provide underlying support for the market.

Although the headline prints for the June Employment Report appeared to be strong and belie the need for Fed easing, the real story is that the Report was weak and argues for a rate cut.  The stronger-than-expected +147k m/m increase in Nonfarm Payrolls was lifted by a 73k jump in Government Jobs.  A bounce in State & Local jobs more than accounted for the latter, with education jobs mostly responsible.  There may have been a mismatch between seasonal factors and school-year end this month.  More importantly, Private Jobs slowed sharply to +74k from +137k in May.  At the same time, the Nonfarm Workweek fell to 34.2 Hours from 34.3 Hours.  As a result, Total Hours fell  0.3% m/m and are 0.5% (annualized) below the Q225 average -- a weak take-off point for Q325.

The dip in the Unemployment Rate to 4.1% from 4.2% also belies labor market strength.  The decline resulted from a drop in the Labor Force, as the Participation Rate fell.  Civilian Employment rose a modest 93k m/m.  A lower Labor Force Participation Rate could reflect discouragement about job opportunities.  Including Discouraged Workers, the Unemployment Rate was steady at 4.5%.

Wage inflation seems to confirm a softening labor market.  Average Hourly Earnings slowed to 0.2% m/m from their recent trend of 0.3%.  The slowing was fairly widespread, as more than half of the major sectors saw AHE equal to or below their Q225 average.  On a quarterly average basis, AHE is on a slow downtrend:

                                Average Hourly Earnings (quarterly average of m/m % changes)

                                               Q225        Q125        Q424        Q324 

                                                 0.27          0.30            0.37        0.40 

Despite the weak ending of Q225, it still looks like economic activity bounced noticeably on a q/q basis.  Total Hours Worked in Q225 rose 1.8% (q/q, saar) after +0.7% in Q125.  The bounce could be attributed to a return to trend after bad weather held economic activity down in Q125.  The Atlanta Fed Model's latest projections is 2.6% for Q225 Real GDP Growth.  Real GDP fell 0.5% in Q125.

Meanwhile, the Unemployment Claims data so far don't suggest the weak ending of Q225 is snowballing.  Claims appear to have stabilized during June.  So, sluggish economic growth in Q325, rather than recession, remains likely -- which would not stop a Fed easing at some point.