Tightrope Economy: Layoff Spike Meets Wage Pressures and Sticky Inflation

Mixed Signals in the Labor Market

Corporate layoff announcements jumped sharply year-over-year; July cuts rose to over 62,000, signaling growing employer caution amid slowing growth and mounting cost pressures. Initial claims inched up to 218,000—still below forecasts—while continuing claims held steady at 1.946 million, underscoring that the labor market remains historically tight despite signs of softening.

In Q2, employment benefits rose just 0.70% quarter-over-quarter (down from 1.20%), while the Employment Cost Index increased 0.90% (versus a forecast of 0.80% and prior 0.90%), and wages accelerated by 1.00% (up from 0.80%). The deceleration in benefit-cost growth suggests easing non-wage compensation pressures, even as faster wage growth highlights persistent tightness and upward pressure on overall labor costs.

Sticky PCE Inflation & Income Rebound in June

Core PCE inflation held steady year-over-year and rose moderately month-to-month, signaling persistent underlying price pressures. Meanwhile, personal income and spending both rebounded by 0.3% in June, supporting continued consumer activity.