Source: Wall Street See

The US job market may not be as vigorous as the Federal Reserve thinks.

Data released by the US Bureau of Labor on Wednesday showed that the monthly non-farm employment growth was about 250,000 last year, but another quarterly employment wage survey (QCEW) covering over 95% of US employment positions showed that the monthly average growth rate of employment in the US last year may have been about 60,000 lower than that of non-farm employment.

As the Federal Reserve weighs when to start cutting interest rates, the release of the QCEW report has added uncertainty to the labor market. Although indicators such as monthly employment and weekly unemployment claims show that the job market is still strong, data such as the rising unemployment rate and declining job vacancies indicate that there are cracks in the labor market.

In order to suppress wage increases and reduce inflation, the Federal Reserve has been trying to cool the labor market by reducing demand for labor. However, if the growth of new employment continues to be slower than generally expected, this may mean that there is a risk of the Fed maintaining too tight monetary policy for too long.

In response to this, Barry Knapp, founder of Ironsides Macroeconomics, believes that:

Monthly business employment surveys may have overestimated the labor market, and the job market is actually weaker than the Fed's estimate.

Anna Wong, chief economist at Bloomberg, said in a report released on Tuesday:

The Federal Reserve may lag behind in taking action and cut interest rates only when the labor market is deep in a downward spiral.

At the same time, others remain cautious about drawing conclusions about the impact on the labor market from QCEW data. Guy Berger, economist at the Burning Glass Institute, believes that:

Even if employment data is significantly revised downward, it will only change the description of the job market from 'prosperous' to 'healthy.'

Mark Zandi, chief economist at Moody's Analytics, said:

QCEW data is often revised, and concerns about a significant downward revision of non-farm employment in February of this year ultimately did not materialize. The result showed that as of March 2023, after the annual benchmark revision, employment data was only about 18,000 lower than the preliminary estimate per month.

In addition, the recent influx of illegal immigrants into the US labor market may also cause differences between non-farm employment data and QCEW data. Sam Coffin, economist at Morgan Stanley, said:

Since QCEW data is based on unemployment insurance payment records, it cannot cover people who have not obtained work permits, so changes in this group are more likely to be reflected in non-farm data.

The US Bureau of Labor will release non-farm employment data for May tomorrow evening, and the market generally expects to add about 185,000 new jobs, slightly up from 175,000 in April.

Editor / jayden