| I'm Chris Anstey, an economics editor in Boston, and today we're looking at evidence of a US economic slowdown. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren't yet signed up to receive this newsletter, you can do so here. The US economy has for quite some time now has looked like the Energizer bunny — an iconic battery-powered rabbit in 1980s advertising that kept going and going, banging on a drum. But if you look closely, the bunny is now slowing down. - Monthly payroll gains averaged 222,000 in the first half of the year, down from 289,000 in the same period a year before. The unemployment rate has climbed (though remains historically low, at 4.1%).
- The housing market has slowed under the weight of mortgage rates that continue to linger near 7%, well above the average of around 4% over the decade before the pandemic.
- The Federal Reserve's latest Beige Book report showed almost half of the 12 Fed districts cited flat or declining activity.
Figures due out Thursday are expected to show the economy grew at a 2% annualized pace last quarter. After the 1.4% of the year's first quarter, that would be the weakest back-to-back pace since the first half of 2022.  The Energizer Holdings Inc. Energizer Bunny mascot. Photographer: David Williams/Bloomberg The good thing is, more than two years since the Fed began its most aggressive monetary tightening cycle since the 1980s, the bottom is hardly falling out of the economy. Retail spending has slowed but not collapsed, and the job market continues to grow, along with real wages. Some liken the current moment to the mid-1990s, when the Fed managed to nail a soft landing, despite traditional harbingers of a recession — such as a contraction in the money supply and persistently weak readings on manufacturing orders. "I don't know that we have a half-decade of expansion to go," Morgan Stanley's chief global economist Seth Carpenter wrote in a recent note. "But for now, we need to see other indicators to change our minds." The slowdown adds to expectations for the Fed to begin lowering rates, with the July 30-31 meeting expected by many to set up a September start to an easing cycle. San Francisco Fed President Mary Daly said in an interview earlier this month: "We don't want to be to a point where we start to see the labor market weaken substantially — to falter — because by then, it is actually often too late to bring it back." - Coming up: The Bank of Canada is likely to cut rates for a second meeting as it aims to steer clear of a recession while avoiding an inflation flare-up.
- UK Prime Minister Keir Starmer told business leaders that he is "on your side" and called for a "new partnership" with the private sector.
- Sri Lanka's central bank lowered its benchmark rates to spur growth as inflation held below the monetary authority's target.
- Australia's prolonged inflation and elevated rates have spurred a "baby recession," with births plummeting to the lowest level since 2006.
- Turkey's central bank took the milestone step of returning a $5 billion deposit from Saudi Arabia, signaling confidence in its ability to restore foreign-exchange reserves without taking on debt from wealthy allies.
For months, there's been an apparent anomaly between strong monthly US payroll gains alongside an increase in the unemployment rate, which in June reached 4.1%, up from the low of 3.4% in January last year. But there's actually no anomaly, Nomura economists Rob Subbaraman and Yiru Chen suggested in a note Tuesday. The reason is, payroll gains haven't actually been running hot. The "thermostat" needs to be reset to account for labor-supply growth stoked by immigration, they wrote. The average estimate of a number of studies, including Bloomberg's, for the monthly payroll gain that would be consistent with a stable unemployment rate is 240,000 for the moment, Nomura found. So the 206,000 increase in June "should not be seen as hot anymore; it
could even be on the cool side." If payrolls start coming in at around 150,000, "the job market should be diagnosed as weak, with labor supply significantly above labor demand," they added. But over the medium term, as immigration slows — all the more so if there's a crackdown under a Trump administration — the "thermostat" will reset again, to where 200,000 "will be hot again," Subbaraman and Chen wrote. | 
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