United States

Research evidence excerpt

Michael Feroli (1-212) 834-5523

JPMorgan Chase Bank NA

Michael S Hanson (1-212) 622-8603

JPMorgan Chase Bank NA

Abiel Reinhart (1-617) 712 9122

JPMorgan Chase Bank NA

Bennett Parrish (1-212) 622-9003

JPMorgan Chase Bank NA

United States

The unemployment rate continued to decline, sliding

to 4.1% for July from 4.2%...

… but the establishment survey was soft and the participation rate fell yet again

On balance the economy should still be OK, and we’ve

raised 3Q GDP from 1.75% to 2.5%

The September FOMC will hinge on upcoming inflation reports; we expect 0.22% core CPI next week

A constellation of indicators suggests that the economy

remains on a solid footing, and we’ve raised our 3Q GDP

forecast from 1.75% to 2.5%. Nonetheless, the signals from

the July employment report were more mixed than they had

been in prior months. The good news was that the unemployment rate fell a full 10bp, from 4.2% to 4.1%, and is at the

lowest point since the start of last year. That improving trend

has been backed up by other related measures, such as continuing claims. But falling unemployment also came with a

23k drop in nonfarm payrolls and downward revisions that

leave the three-month trend at a mere 20k. This may be

another summer slowdown, but it takes away some of the

sense that job growth was picking up after a sluggish 2025.

Given uncertainty about breakeven employment levels, we

would normally say to focus on the direction of the unemployment rate. That is still probably right. But the household

survey came with its own caveats, namely a further drop in

the participation rate, which follows on the back of a particularly large decline in June (Figure 1). The result is that even

in the household survey there has yet to be any pickup in the

employment-to-population ratio.

Figure 1: Labor force participation rate

Percent, sa, both scales

Prime age (25-54)

64

62

For next week’s CPI report, our July forecast for core CPI of

0.22%m/m is probably not quite firm enough to prompt a

hike from the FOMC at the September meeting, though

repeated prints closer to 0.3% could do it. One thing we are

…