06/07/2024 | Press release | Distributed by Public on 06/07/2024 09:48
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Key Takeaways:
Payroll employment increased by more than both consensus and our estimate. The strength in the May report suggests that April was not in fact the beginning of a long-awaited slowdown in job growth, which will likely lead to a near-term upward revision to our payroll employment forecast. However, the persistent divergence between the payroll and household surveys adds risk to our forecast and our broader understanding of the strength of the labor market. The recent Quarterly Census of Employment and Wages (QECW) data (an alternative measure used in benchmarking payroll employment data) suggest that the payroll figures will be revised downward during revisions. However, it will almost certainly not be to the current level of the household employment survey. Further, initial unemployment claims are at a level that would be normal in 2019 and are more consistent with the payroll survey. We believe the true strength of the labor market is likely somewhere in between the payroll and establishment surveys, and we continue to forecast a slowing in economic growth as the year progresses.
The ISM indices were mixed as manufacturing fell further into contractionary territory, while the services index hit its highest level since last summer. While neither indicator has been particularly reliable at predicting activity data in recent years, the balance of the two would be consistent with our forecast for slowing growth as the year progresses. Incoming trade data shows that net exports are likely to weigh on GDP again in Q2, though strength in imports may signal better consumption than recent data releases have suggested. On balance though, the April trade data is likely to cause a downgrade to our net exports forecast, which will weigh on our projected near-term GDP growth outlook.
Nathaniel Drake
Economic and Strategic Research Group
June 7, 2024
Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.