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Economic Update May 2024

Economic Update May 2024

May 21, 2024

At PalomarWealth, it is important that you are well-informed about what is happening in the markets. Here are a few of the key topics of conversation that deserve the most attention this month. If you have any questions or would like to continue the conversation, please reach out.

As analysts assess the health of the economy, the latest jobs reports raise concerns about a potential slowdown. In April, nonfarm payrolls rose by the smallest amount in six months. The unexpected slowdown in job creation was underscored by a rise in the unemployment rate, which ticked up from 3.8% to 3.9%1. This rise in unemployment, coupled with weaker-than-expected business activity in the service sector2, suggests a potential cooling in the labor market. In addition, jobless claims are on the rise, with significant increases in claims observed in New York and California, where a minimum-wage hike may further impact unemployment3. Finally, a May report from an employment agency found that job cuts have decreased, but hiring plans are at their lowest since 20164.

The US economy experienced slower growth in the first quarter of 2024, with real GDP increasing at an annual rate of 1.6%, falling short of the 2.5% expected by economists and down from 3.4% in the previous quarter5. Consumer spending and housing investment were key growth drivers, although personal spending grew at a slower-than-expected rate. Spending on services saw its largest increase since Q3 2021, primarily driven by health care and financial services, while spending on goods declined due to constraints in cars and gas.

In a much-needed reprieve from inflation, the Consumer Price Index (CPI) slowed for the first time in six months, increasing by 0.3% in April and by 3.4% over the past year6. Core CPI, which excludes the more volatile food and energy components, rose 0.3% in April and 3.6% from last year6. Economists see core CPI as a better inflation indicator, which showed a three-month annualized increase of 4.1%, the smallest since the start of the year6. However, The Federal Reserve’s preferred inflation measure, the core Personal Consumption Expenditure (PCE) price index, rose at a higher-than-expected 3.7% rate, marking the first quarterly acceleration in a year7. Bloomberg Economics notes that the April CPI report may support the possibility of a July rate cut, but the Fed remains cautious8.

The Bottom Line: While the latest inflation figures may give the Federal Reserve some hope that inflation is resuming its downward trend, officials need more data before considering rate cuts. Chairman Jerome Powell emphasized the need for patience, stating that the central bank must allow restrictive policies to take effect. Several Federal Reserve officials have stated that rates would likely remain high due to persistent inflation, with some anticipating no rate cuts this year. While acknowledging the economy's positive momentum, policymakers have expressed caution regarding potential economic shocks and commercial real estate risks, reinforcing the Fed's commitment to achieving the 2% inflation target. Either way, changing expectations on what the Fed may do throughout the year will likely remain and, if they shift rapidly enough, can cause short-term bouts of market volatility. Thankfully, so far this year, those shifting expectations have been effectively limited to the bond market.


  1. Bureau of Labor Statistics,
  2. Institute of Supply Management,
  3. Department of Labor,
  4. Bloomberg News
  5. Bureau of Economic Analysis,
  6. Bureau of Labor Statistics,
  7. Bureau of Economic Analysis,
  8. Bloomberg News



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Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The PCE (Personal Consumption Expenditures) Price Index - A measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.

The Bureau of Economic Analysis (BEA) is an agency of the Department of Commerce that produces economic accounts statistics that enable government and business decision-makers, researchers, and the American public to follow and understand the performance of the nation's economy. To do this, BEA collects source data, conducts research and analysis, develops and implements estimation methodologies, and disseminates statistics to the public.

The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.


Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.