PNC economists provide insight into key indicators that may have an impact on current business performance and the path ahead.

Federal Funds Rate 

  • The FOMC kicked off an easing cycle with a 50-basis point cut in the federal funds rate. Although the rate cut was universally expected, the size of the cut was uncertain. The fed funds rate is now in a range between 4.75% and 5.00%. This is the first cut in the fed funds rate since March 2020, when the FOMC cut the fed funds rate to close to zero in response to the pandemic.
  • The statement announcing the decision noted “further progress toward the Committee’s 2% [inflation] objective,” but also that “job gains have slowed, and the unemployment rate has moved up but remains low.” The statement also said that risks between high inflation and a soft labor market “are roughly in balance.”
  • Per the Summary of Economic Projections, or “dot plot,” the median projected fed funds rate at the end of this year is 4.4%, which suggests 25-basis point cuts at each of the two remaining FOMC meetings this year (early November and mid-December). The projected median fed funds rate at the end of 2025 is 3.4%, which suggests an additional four 25-basis point cuts next year. The median projected fed funds rate is 2.9% at the end of 2026, the same as the long-run median fed funds rate.

Employment

  • Initial unemployment insurance claims fell by 12,000 to 219,000 for the week ending September 14. This is down from an upwardly revised 231,000 in the previous week but up from 210,000 a year ago.
  • The four-week moving average, which smooths out choppiness in the data, increased by 2,750 from a year ago, suggesting that the U.S. labor market is slowly softening. The insured unemployment rate was unchanged at 1.2% for the week ending September 7, and is unchanged from the same week last year. 
  • Continuing claims for unemployment insurance fell by 14,000 to 1.829 million for the week ending September 7. Continuing claims are marginally higher compared to a year earlier (1.793 million). Meanwhile, the four-week moving average fell by 6,500 to 1.844 million but is up from 1.806 million in the same week last year, implying it is taking unemployed workers longer to land a new job. This is supported by the sharp slowdown in job growth this year with average monthly gains of 184,000 compared to 251,000 for all of 2023.
  • Despite the drop in initial claims last week, the labor market is softening but is far from loose. Job growth has slowed markedly, and the unemployment rate has risen from the low of 3.4% last year to 4.2% in August. PNC expects a further cooling in the labor market through the rest of 2024 as high interest rates – notwithstanding the 50-basis point cut – continue to limit economic growth. PNC expects job growth to down shift to around 150,000 per month for the balance of this year and drop to around 100,000 per month in the first half of 2025. As a result, the unemployment rate will increase modestly over the next year to around 4.5%.

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PNC economists provide analyses and forecasts of national, regional, and global economic and financial trends. For more economic data and reports, visit www.pnc.com/economicrelease.

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