Key Points:
The BLS employment report showed only 57K jobs were added in June while the unemployment rate fell to 4.2% from 4.3%.
- Falling labor force participation is one reason that the pace of job creation can slow without leading to rising unemployment.
- While participation exceeded many pre-pandemic forecasts in recent years, participation rates have fallen steadily over 2026.
- Over the second quarter of the year, the labor force participation rate was only 0.2pp above the CBO’s January 2020 projection.
Labor Force Participation Rate
5-year breakeven inflation, equal to the difference in yield between 5-year Treasuries and 5-year Treasury inflation protected securities (TIPS), fell to the lowest levels of the year in recent weeks as energy prices fell.
- This measure indicates what investors expect CPI inflation will be on average over the next 5 years.
5-Year Breakeven Inflation Rate
