The U.S. initial jobless claims slightly declined last week, as reported by the Bureau of Labor Statistics on August 29. The Initial claims was 231,000, down by 2,000 from the revised figure of the previous week, outperforming market expectations of 232,000. The four-week moving average was 231,500, down by 4,750 from the previous week’s revised figure. Meanwhile, continuing claims increased by 13,000 to 1,868,000.

At the same time, the Bureau of Economic Analysis also released the second estimate for Q2 Real GDP, revising the annual growth rate up to 3.0%, an increase of 0.2% from the preliminary estimate. The core PCE inflation rate was revised down to 2.8%, a decrease of 0.1% from the preliminary estimate. Overall, the U.S. economy continues to demonstrate resilience, with inflation remaining on a downward trend.

During last week’s Jackson Hole Global Central Bank Symposium, the Federal Chairman Jerome Powell reiterated that the risks of rising inflation are continuing to diminish and that there is sufficient reason to believe inflation will return to 2%.

Meanwhile, the downside risks to the labor market are gradually increasing. Although the unemployment rate remains at a historically low level, it has risen back to 2023 levels. This increase is primarily due to higher labor supply and job vacancies rather than widespread layoffs. However, the Fed do not welcome any further cooling of the labor market.

Finally, Powell clearly stated that the time for policy adjustments has arrived. Although he did not reveal specific plans for rate cuts, insights can be gained from the September release of the Summary of Economic Projections (SEP), where adjustments to the dot plot will indicate the pace and magnitude of future rate cuts by the Fed. Currently, the market expects the Fed to cut rates by 3 to 4 quarter-points throughout 2024 (1 quarter-point in September, 1 to 2 quarter-points in November, and 1 quarter-point in December).

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