Update 786: 272,000 Jobs Added in May

September 23, 2024 | Update, Weekly Round Up | By

Update 786 — 272,000 Jobs Added in May;
Robust Report to Give Fed (Another) Pause?

The labor market remains remarkably strong in the lead up to the Fed’s June interest rate decision next week. Before we can see long-awaited interest rate cuts from the Fed, Chair Powell has said that it must either see inflation approach its two percent target or a weakening in the job market. With prices stuck for months in the three percent range, the May jobs report published this morning suggests that the labor market is far from weakening and remains as strong as ever, likely prolonging the long-anticipated loosening of monetary policy. 

We look at the report and ask if it might move the dot plot of Fed rate projections at next week’s FOMC meeting. We also cover the House GOP’s opening FY25 budget moves, a hearing on Social Security Trust Fund reform, the CFPB’s new “repeat offenders” registry, and the Senate Judiciary Antitrust Subcommittee hearing on competition and economic resiliency — see below.

Good weekends all…

Best,

Dana

Headline

Higher-Than-Expected 272,000 Jobs Added in May

Total nonfarm payroll employment rose by roughly 272,000 jobs, significantly exceeding expectations, and the unemployment rate ticked up slightly to 4.0 percent in May, according to this morning’s jobs report released by the Bureau of Economic Analysis. 

Job growth in April was revised down by 10,000, from 175,000 to 165,000 jobs, while job growth in March was revised down by 5,000, from 315,000 to 310,000 jobs. This brings the average monthly jobs gain over the past three months to 249,000 jobs.

Source: Council of Economic Advisors

May represents the forty-first consecutive month of job growth. The largest gains came in:

  • health care (68,000 jobs)
  • government (43,000 jobs)
  • leisure and hospitality (42,000)
  • professional, scientific, and technical services (32,000 jobs)
  • social assistance (15,000 jobs)
  • retail trade (13,000 jobs)

The unemployment rate ticked up slightly from 3.8 percent in March and 3.9 percent in April to 4.0 percent last month, with 6.1 million people unemployed. The unemployment rate continues to be historically low and has now remained at or below four percent for thirty consecutive months. Nothing in the unemployment rate hints that the Fed is pursuing an overly contractionary rate policy. 

Today’s jobs report will be the last before the Federal Open Market Committee (FOMC) convenes next week to decide whether to hold interest rates steady at the 5.25 to 5.5 percent range once again. Earlier this year, Committee officials had projected three cuts to the interest rate this year, but strong labor market data, as shown in today’s jobs report, is unlikely to push the FOMC toward an immediate cut. Committee officials will keenly consider the labor market data when they make new projections about their expected rate cuts over the remainder of the year. 

Other Developments 

House Moves Forward on FY25 Bills Amid Veto Threats

This week, the House took an initial step forward in the Fiscal Year 2025 appropriations process, passing the Military Construction and Veterans Affairs spending bill — generally considered among the smallest and least controversial of the appropriations bills —by a 209-197 vote. The Biden administration weighed in on the funding legislation prior to its passage with strong opposition earlier this week, in a statement: “Similar to last year, H.R. 8580 includes numerous, and by now familiar partisan policy provisions with devastating consequences, including 

  • harming access to reproductive healthcare
  • threatening the health and safety of lesbian, gay, bisexual, transgender, queer, and intersex Americans
  • endangering marriage equality, hindering critical climate change initiatives
  • preventing the administration from promoting diversity, equity, and inclusion

President Biden promised to veto the legislation if it makes the unlikely journey to his desk later this year. 

The tight top-line funding caps outlined in last year’s Fiscal Responsibility Act (FRA) and Republican insistence on including extreme policy riders have continued to fuel funding disagreements, leading to a process very similar to the FY24 process when Congress repeatedly kicked the funding can down the road until an agreement was finally reached in March – almost six months after the start of the fiscal year. To make matters worse, we have seen reignited conflict over “side-deal” adjustments for non-defense discretionary (NDD) funding that were added to ensure democratic support for the FRA. 

This “side-deal” funding, totaling just south of $70 billion, ensured that both NDD and defense funding would increase by one percent year-over-year in FY24 and FY25 – a demand that has been reiterated by top House Appropriations Democrat Ranking Member Rosa DeLauro (D-CT). House Appropriations Chairman Tom Cole’s (R-OK) refusal to include the side deal funding could lead to an across-the-board six percent cut in NDD funding, though the cuts would not be distributed evenly. Labor, Health, and Human Services (Labor-HHS), State and Foreign Operations, and Financial Services and General Government (FSGG) face cuts of around 10 percent while others like Homeland Security would receive full funding. 

Funding outlined in initial appropriations proposals currently making their way through the House should be seen as a floor, not a ceiling while we continue to push for adequate NDD funding. As Congress is all but certain to turn to a Continuing Resolution (CR) to push the FY25 deadline past November’s election, and possibly into the new year, there will no doubt be a different political landscape when Congress gets around to considering final FY25 funding legislation, with election outcomes a critical factor. 

CFPB Registry to Track Corporate Repeat Offenders 

On Monday, the Consumer Financial Protection Bureau (CFPB) finalized a rule to establish a registry of corporate offenders that have broken consumer laws and are subject to federal, state, or local government or court orders. 

When a financial company, including non-bank entities like payday lenders, violates consumer law, relevant government agencies and courts enter an order against them as they take enforcement action. The CFPB’s centralized database is designed to help the Bureau more easily identify repeat offenders and recidivism trends and help state attorneys general, state regulators, and a range of other law enforcement agencies better understand and track the conduct of bad actors in the financial system. 

This is the first rule by the CFPB to exercise its authority to register non-bank entities and is an important step towards tracking the misconduct of companies that illegally extract money from American consumers for profit, ultimately holding them accountable, and deterring such misconduct in the first place. 

Hearings

Social Security Subcommittee Weighs Program Options

On Tuesday, the House Ways and Means Subcommittee on Social Security held a hearing to discuss the current status and future of the Social Security Trust Funds, following the release of the annual Trustees Report last month. Members of the Subcommittee were joined by witnesses, Congressional Budget Office (CBO) Director Phil Swegel, Social Security Administration (SSA) Chief Actuary Stephen Goss, and Congressional Research Service (CRS) Social Policy Analyst Barry Huston. 

Representatives from both parties as well as expert witnesses expressed concern about the financial state of Social Security – which is projected to reach insolvency in 2034 (CBO) or 2035 (SS Trustees). The program’s shortfalls, which are primarily motivated by the disparity between baby boomers retiring and people joining the workforce, would lead to an automatic 21 to 25 percent cut in benefits to match outlays with payroll tax revenues – the only option available for the program upon reaching insolvency without legislative action. 

Ranking Member of the Ways and Means Social Security Subcommittee John Larson (D-CT), called on Republicans to vote on Social Security reform. His proposal (the Social Security 2100 Act) is the leading democratic proposal in the House for Social Security reform and would secure solvency through 2066 while expanding benefits. Democrats present, like Rep. Larson, noted that Republican plans for Social Security involve making benefit cuts and increasing the retirement age to address the program’s projected shortfalls, leading to nothing more than accelerated cuts for recipients. 

The top Republican on the Subcommittee, Rep. Drew Ferguson (R-GA), provided a stark contrast between the Republican Party’s “commitment” to the program and Democratic promises to work on behalf of beneficiaries. He stated, “There have been a lot of programs out there that help seniors…it’s a little bit disingenuous to say seniors don’t have any other lifelines and this is the only thing.” The GOP proposals and this comment reflect a lack of understanding about the value of Social Security for many. 40 percent of retirees rely on Social Security as their only source of income, and those who rely on the program for their entire retirement income often receive benefits that place them below the poverty line. 20/20 Vision urges Congress to oppose Republican-proposed cuts to Social Security and vote on the Social Security 2100 Act, protect and expand our most important safety net. 

Senate Antitrust Subcommittee Hearing on Competition

The Senate Committee on the Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights convened on Wednesday for a hearing focused on the role of competition in enhancing economic resiliency. 

As Subcommittee Chair Amy Klobuchar (D-MN) noted, when a handful of companies control our supply chains, our entire system becomes susceptible to disruptions that can put our economy and national security at risk. As industries across the American economy have become increasingly consolidated, concerning chokepoints have emerged along supply chains. When we must broadly rely on a few or even one supplier for a product we need, a single supply chain disruption can have a significantly exacerbated impact. As Chair Klobuchar highlighted, this was clear when the U.S. faced a shortage of IV bags following Hurricane Maria, as one company had consolidated the majority of production of IV bags into a single facility on the island.

The growing prevalence of such chokepoints is yet another reason why our antitrust enforcers must have the resources they need to effectively tackle unprecedented concentration in the American economy. Chair Klobuchar highlighted the Subcommittee’s work to pass the Merger Filing Fee Modernization Act in 2022 to provide the Justice Department’s Antitrust Division with the funding it needs to do exactly this. That’s why it is critical that appropriators honor the commitment of Senate Commerce, Justice, and Science Subcommittee Chair Jeanne Shaheen (D-NH) to remove all previously adopted language that would circumvent Congress’s will in enacting the important legislation as the B panel considers funding in FY25. 

Look Ahead

Tuesday, May 11

  • June FOMC meeting (Day 1)

Wednesday, May 12

Thursday, June 13

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