US growth likely slowed in June after surging in the prior two months, but labor market conditions remain tight, with the unemployment rate expected to have retreated from a seven-month high and fairly strong wage gains persisting
The Labor Department's closely watched employment report on Friday will be among factors leading the Federal Reserve to resume raising interest rates this month as signaled by the U.S. central bank and Chair Jerome Powell, after pausing in June.
"Monetary policy has been working in slowing employment growth since its peak about a year ago," said Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles. "However, that doesn't mean that we will see a recession, the probability of a recession has diminished."
The unemployment rate is forecast dropping to 3.6% from 3.7% in May, which would leave it just shy of a 53-year low of 3.4% touched in April.Employment growth is also being driven by companies hoarding workers, a legacy of the dire labor shortages experienced as the economy rebounded from the COVID downturn in 2021 and early 2022.
But some economists argued that worker hoarding was masking weakness in the economy, pointing to worker productivity, which slumped in the first quarter. They also noted that while gross domestic product, the traditional measure of economic growth, was solid in the January-March quarter, an alternative gauge, gross domestic income, has contracted for two straight quarters.
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