Source: Wall Street News
On Friday May 3, the US Department of Labor released data showing that the increase in the US non-farm payrolls in April fell significantly short of expectations. It was the smallest increase in six months. The unemployment rate unexpectedly rose, and the year-on-year increase in wages was lower than expected and the previous value. After the data was released, traders' expectations for the Federal Reserve's first interest rate cut were brought forward from November to September. US stocks and US bonds rose, and the US dollar fell.
The US non-farm payrolls increased by 175,000 in April. It is expected to be 240,000, compared to the previous value of 303,000.
The US non-farm payrolls unemployment rate in April was 3.9%, which is expected to be 3.8%, compared with the previous value of 3.8%. The unemployment rate is roughly at its highest level since January 2022. US Treasury Secretary Yellen's more important and more comprehensive U6 unemployment rate was 7.4%, the highest level since November 2021. This includes people who are not actively looking for work, and part-time workers who want to find a full time job.
The average hourly wage in the US in April was 3.9% year-on-year, and the forecast was 4%, compared with the previous value of 4.1%. The average hourly wage in the US in April was 0.2% month-on-month, expected 0.3%, and the previous value was 0.3%. The cooling in wage growth is an encouraging sign for inflation. Before the data was released, some economists expected wage growth to be stronger, partly due to a new California law stipulating a minimum wage of $20 for fast food restaurant workers. The law came into effect on April 1.
However, it should be noted that wage increases in non-farm payrolls data are different from the series of jobs released earlier this week. Earlier reports generally showed that although demand for workers has cooled down, wage pressure continues.
The average weekly working hours in the US in April were 34.3 hours. The forecast was 34.4 hours, compared to the previous value of 34.4 hours.
The US labor force participation rate in April was 62.7%, which is expected to be 62.7%, compared with the previous value of 62.7%. Among them, the proportion of workers aged 25-54 rose to 83.5%, the highest level in 20 years. Increased labor force participation will help curb wage growth.
The number of people employed in the private sector in the US changed by 167,000 in April. It is expected to be 195,000, compared to the previous value of 232,000. The number of people employed in the US manufacturing industry changed by 80,000 in April. It is expected to be 50,000, compared to the previous value of 0.0,000.
Looking at industry segments, in line with recent trends, healthcare has led the creation of jobs, adding 56,000 new jobs. Other industries that have experienced significant growth include social assistance of 31,000, transportation and warehousing of 22,000, and retail sales of 20,000.
Employment growth is slowing in the construction industry, government sector, and leisure and hospitality industries. Among them, the construction industry has added 9,000 jobs, while the number of jobs in government departments that have performed well in recent months has only increased by 8,000. Previously, the average for the past 12 months had reached 55,000. There has been a decline in jobs for car manufacturers and temporary assistance service providers.
The non-farm payrolls report was compiled from two separate surveys. Surveys of businesses and government agencies produce data on the number of employed people and wages, and surveys of households are used to calculate the unemployment rate. The household survey also published its own employment indicators. Following a surge of nearly 500,000 in March, the number of employed people increased by only 25,000 in April. This may once again raise questions about why there is still such a big gap between this figure and the overall non-farm payrolls data.
Market reaction
The US Non-Farm Report fell short of expectations, and the market reacted quickly:
The US dollar index fell about 60 points in the short term. The decline of the dollar against the yen extended to more than 1% to 152.09. Since this week, it has fallen 4%, making it the biggest decline since November 2022.
US Treasury yields have declined in the short term, and US bond yields for most matures have declined by at least 10 basis points during the day.
US stock futures rallied in the short term, and Dow futures increased to 1.4%.
Spot gold rose by about 7 US dollars in the short term and quickly fell back to 2296.9 US dollars/ounce.
Analytical reviews
According to the analysis, the latest non-agricultural data shows that the US labor market is cooling to a certain extent after a strong start to this year. The report further indicates that demand for workers is slowing down, but this data may not equal what Federal Reserve Chairman Powell called “unexpected weakness,” and will require policy responses as a result.
Recruitment and wage growth are cooling down very slowly, which is part of the reason why Federal Reserve policymakers say they are in no hurry to lower interest rates from 20-year highs. Powell also acknowledged the increase in labor supply, particularly driven by the influx of immigrants.
The Federal Reserve kept interest rates unchanged for the sixth time in a row at the FOMC meeting this week. Powell believes that monetary policy is restrictive because demand for labor is weak, even though demand for labor still exceeds the supply of available workers. As inflation has fallen sharply from its peak in 2022, Federal Reserve officials are now also focusing on ensuring maximum employment.
edit/lambor