Everyday Economics: Could bond yields, mortgage rates ease further this week?

The focus is rapidly shifting from inflation to concerns that the U.S. economy may be cooling too quickly.

Firstly, economists at Goldman Sachs hinted that further softening in labor demand could lead to increased layoffs. The Beveridge curve, which shows the relationship between the unemployment rate and job opening rates, serves as a crucial indicator of the labor market's health. A low unemployment rate and a high vacancy rate signify a tight labor market and a growing economy. Movements along this curve indicate shifts between recession and expansion.

Currently, the U.S. Beveridge curve suggests a critical juncture where a decline in vacancy rates might coincide with an increase in unemployment.

This week's focus will be on personal income, personal consumption data, and the Fed’s preferred inflation gauge – the PCE price index. The core PCE index's annual increase is projected to ease to 2.6% from 2.8% last month, potentially indicating inflation lower than anticipated in the Fed's "dot plot," which currently suggests only one rate cut in 2024.