Source: Wall Street View, author: Zhao Yuhe.
According to statistics, employment has been revised downward in 4 out of the past 5 months. ZeroHedge, a financial blog, indicates that although officials in the Biden administration seem unwilling to abandon the myth of a 'strong labor market', they have indirectly acknowledged the severity of the situation. The 'New US Fed News Agency' has stated that although June non-farm data is insufficient to prompt the Fed to cut interest rates at the July meeting, it is likely to lead to a more heated debate on interest rate cuts in September at the July meeting.
The US Department of Labor reported on Friday that non-farm employment increased by 0.206 million people in June, exceeding expectation of 0.19 million but still a significant drop from the previous value of 0.272 million. Although non-farm employment in June exceeded Wall Street's expectations, it still fell significantly from May, and the unexpected rise in the unemployment rate to its highest level in two and a half years indicates a significant cooling of the labor market.
What is more noteworthy is that the number of newly employed people in April was revised down sharply from 0.165 million to 0.108 million, while the number of newly employed people in May was revised down significantly from 0.272 million to 0.218 million. After revision, the total number of newly employed people in April and May decreased by 0.111 million compared to the unrevised figure. According to statistics, employment has been revised downward in 4 out of the past 5 months. ZeroHedge considers this to be the trick behind the frequent exceeding of expectations of US non-farm data: pushing up this month's data by adding non-existent jobs. However, if next month's June data is revised downward, the revised figure is likely to be lower than the analysts' expectations for this month, but it will be too late to do anything about it. ZeroHedge analyzed that although officials in the Biden administration seem unwilling to abandon the myth of a 'strong labor market', they have indirectly acknowledged the severity of the situation.
ZeroHedge points out that the main trick behind the frequent surpassing of expectations for US non-farm data is to push up this month's data by adding non-existent jobs. Suppose that next month's June data is revised downward, the revised figure is likely to be lower than the analysts' expectations for this month, but it will be too late to do anything about it. ZeroHedge analyzed that although officials in the Biden administration seem unwilling to abandon the myth of a 'strong labor market', they have indirectly acknowledged the severity of the situation.
Moreover, ZeroHedge pointed out that the composition of newly added jobs is problematic: employment in the private sector was 136,000, far below the expected 160,000 and lower than the revised 193,000 (previously 229,000). This gap was filled by government employees, whose employment increased from 25,000 to 70,000, higher than the average monthly increase of 49,000 over the past 12 months. Employment in local government (excluding education) increased by 34,000, and employment in state government increased by 26,000. ZeroHedge pointed out that it is well known that these people do not actually produce anything, but only consume American wealth and redistribute income. Even CNBC's senior financial reporter, Steve Liesman, believes that the increased job position is mainly government positions.
In addition, ZeroHedge pointed out that the Bureau of Labor Statistics usually regards growth in part-time jobs as the main driving force of the US labor market, and June was no exception. The number of part-time workers increased by 50,000 to 28.1 million, while the number of full-time workers decreased by 28,000. This means that since June 2023, the US has added 1.8 million part-time jobs and lost 1.6 million full-time jobs.
In response to this, Rubeela Farooqi, Chief US Economist at High Frequency Economics, stated:
"Overall, the slowdown in job growth in the second quarter, coupled with the unexpected rise in the unemployment rate and the slower growth path shown in recent data, provides a reason for rate cuts this year. If the data continues to show signs of slowing, we believe that the Fed may begin discussing rate cuts at the upcoming FOMC meeting and cut policy rates in September."
Seema Shah, Chief Global Strategist at Principal Asset Management, also stated:"On the one hand, downward revisions and rising unemployment rates in the previous months have increased the possibility of a rate cut by the Fed in September-bond markets are celebrating this. However, these data also raise concerns about the direction of the US economy. Broad economic data suggests that the economy is slowing down, and today's report reinforces this impression."
Nick Timiraos, a well-known financial journalist known as the 'New US Fed News Agency', said that although recruitment was solid in June and there are signs of a cooling US labor market in the second quarter, this is not enough to prompt the Fed to cut interest rates at the July meeting, but it may lead to a more heated debate at the July meeting on whether to cut interest rates in September.
He said that Friday's report showed that the labor market continued to slow down, as expected by the Fed, but there would also be board members who believe that inflation has not shown enough progress to support interest rate cuts. Therefore, next week's moderate inflation report may strengthen the determination of Fed doves who are more concerned about the weak labor market, and they will insist that the Fed should prepare to cut interest rates in September.
"This is what ZeroHedge calls the trick behind the frequent exceeding of expectations for US non-farm data, pushing up this month's data by adding non-existent jobs. Although officials in the Biden administration seem unwilling to abandon the myth of a 'strong labor market', they have indirectly acknowledged the severity of the situation."
Editor/Lambor