Source: Yu Bohong's Macro Notes Author: Yu Bo 1. Did the US labor market weaken with the slowing growth in non-farm payrolls in June? Looking at it by sector, government employment has become the main contributor, while the commodity production sector continues to expand slightly, and employment in the service industry has clearly weakened. 2. The deceleration of non-farm private sector hourly wage growth, as expected, indicates that the pressure on core service inflation improvements has eased. 3. The seasonally adjusted unemployment rate unexpectedly increased, the labor participation rate increased, and the employment rate remained flat, reflecting the improvement in the problem of insufficient labor supply and the hope of closing the supply-demand gap. 4. Overall, it is a fact that the US employment market is trending weaker, but our benchmark judgment is still a steady improvement in the tense situation, and the current labor demand is still strong and the supply-demand gap is still being closed. The June data does not mean an increase in the need for a rate cut, and we still expect the Federal Reserve to cut interest rates 0-1 times this year. Non-farm employment growth slowed down, and government employment became the main contributor. According to business survey data, US non-farm employment in June decreased to 0.206 million people, which exceeded the Bloomberg consensus expectation of 0.19 million people. The previous value was revised down sharply to 0.218 million people from 0.272 million people. So, did the US labor market weaken? Specifically, 1) In June, government employment became the main contributor, and new employment increased to 0.07 million people; 2) The commodity production sector also continued to expand slightly, and new employment increased to 0.019 million people, of which the construction industry still led the way in new employment (0.027 million), but employment in durable and non-durable goods consumption in the manufacturing industry both decreased, reflecting a decline in employment demand due to weak commodity consumption demand. 3) In addition, in line with the fact that the non-manufacturing sector has once again turned cold, employment in the service industry has obviously weakened, and the overall number of new jobs has fallen to 0.117 million people. Among them, education and health care industries still recorded steady growth in new employment (0.082 million), maintaining the strongest absorption level, while wholesale (0.014 million) and other services (0.016 million) both saw significant growth in new employment. However, new employment in most other industries has declined, especially for professional and business services (-0.017 million) and the retail industry (-0.009 million). Declining hourly wage growth and easing inflation pressure In June, the monthly and year-on-year growth rates of hourly wages in the non-farm private sector both fell to 3.9% and 0.3%, respectively, which were in line with expectations, indicating that the pressure on core service inflation may be easing to some extent. By type, the month-on-month wage gains in production-related industries continued to rise by 0.1 percentage point to 0.4%, with hourly wages in the mining and construction industries rising, while hourly wages in the manufacturing industry remained flat. The month-on-month growth rate of wages in the service sector fell by 0.1 percentage point to 0.3% compared with last month, with wages in all industries except transportation storage and professional and business services declining, reflecting weaker resistance to inflation. Unexpected rise in unemployment rate, improvement in labor supply According to household survey data, the seasonally adjusted unemployment rate in the United States rose more than expected to 4.1% in June, and the broader U4 and U5 unemployment rates reflecting more widespread unemployment situations also rose 0.1% and 0.1% to 4.3% and 4.9%, respectively, consistent with the results of business surveys pointing to a cooling job market. In terms of structure, the labor force participation rate increased and the employment rate remained flat, indicating an improvement in the problem of insufficient labor supply, and the supply-demand gap is expected to converge. Job market cooling, strengthening expected rate cuts With the decline in non-farm employment growth in June and the rise in the unemployment rate, coupled with the narrowing of wage growth, all pointing to a cooling of the US labor market, the expected rate cuts have strengthened after the data was released, with the US dollar and US bonds falling and US stocks rising. We believe that looking at US employment market data since the beginning of the year, the repeated downward revisions in data mean that a weakening of the job market is a fact, but our benchmark judgment is still a steady improvement in the tense situation.
Author: Yu Bo The weather is good today The weather is good today.

Event Description

On July 5th, 2024, the US Bureau of Labor Statistics released the non-farm employment data for June 2024: the US added 0.206 million non-farm jobs in June 2024, expected to increase by 0.19 million, and the previous value was revised down to 0.218 million; the seasonally adjusted unemployment rate was 4.1%, expected to be 4%, and the previous value was 4%.

Key Takeaways

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In June, did the slowing growth in non-farm payrolls in the US mean that the country's labor market was weakening? Looking at it by sector, government employment was the main contributor, while the commodity production sector continued to expand slightly, and employment in the service industry clearly weakened. The deceleration of hourly wage growth in the non-farm private sector as expected indicates that the pressure on core service inflation improvements may be easing. The seasonally adjusted unemployment rate unexpectedly increased, but the labor participation rate and the employment rate remained steady, reflecting improvement in the problem of insufficient labor supply and the hope of closing the supply-demand gap. Overall, the US job market is trending weaker, but our benchmark judgment is still a steady improvement in the tense situation. Current labor demand remains strong and the supply-demand gap is being closed. June's data does not mean there is an increased need for rate cuts, and we still expect the Federal Reserve to cut interest rates 0-1 times this year.

In June, the US non-farm private sector hourly wage growth decelerated as expected, pointing to an easing of the pressure on core service inflation improvements.According to the type of industry, the monthly wage gains in production-related industries continued to rise, while the service sector experienced a decline.

In general, it is a fact that the US job market is trending weaker, but our benchmark judgment is still a steady improvement in the tense situation. Current labor demand remains strong and the supply-demand gap is being closed. June's data does not mean there is an increased need for rate cuts, and we still expect the Federal Reserve to cut interest rates 0-1 times this year.

Non-farm employment growth slowed down, and government employment became the main contributor.

According to business survey data, US non-farm employment in June decreased to 0.206 million people, which exceeded the Bloomberg consensus expectation of 0.19 million people. The previous value was revised down sharply to 0.218 million people from 0.272 million people.

Did the US labor market weaken with the slowing growth in non-farm payrolls in June?

In June, government employment became the main contributor to non-farm employment in the US, while the commodity production sector continued to expand slightly, and employment in the service industry clearly weakened. Specifically, government employment contributed 0.07 million new jobs, while the commodity production sector contributed 0.019 million new jobs. Among the different product types, employment in the construction industry was the main contributor to this increase. However, the number of new jobs in the consumer goods manufacturing industry decreased, reflecting a decline in employment demand due to weak commodity consumption demand. In addition, employment in the service industry obviously weakened, and new jobs fell to 0.117 million people. Among them, education and health care industries still recorded steady growth in new employment, while new employment in most other industries declined, especially for professional and business services and the retail industry.

In June, government employment became the main contributor to non-farm employment in the US, while the commodity production sector continued to expand slightly, and employment in the service industry clearly weakened. Specifically, government employment contributed 0.07 million new jobs, while the commodity production sector contributed 0.019 million new jobs. Among the different product types, employment in the construction industry was the main contributor to this increase. However, the number of new jobs in the consumer goods manufacturing industry decreased, reflecting a decline in employment demand due to weak commodity consumption demand. In addition, employment in the service industry obviously weakened, and new jobs fell to 0.117 million people. Among them, education and health care industries still recorded steady growth in new employment, while new employment in most other industries declined, especially for professional and business services and the retail industry.

In June, hourly wage growth in the non-farm private sector of the US decelerated, pointing to an easing of the pressure on core service inflation improvements.

Hourly wage growth in the non-farm private sector in the US fell to 3.9% and 0.3% month-on-month and year-on-year, respectively, in June, as expected. This indicated that the pressure on core service inflation improvements may be easing to some extent.

In June, the monthly wage gains in production-related industries continued to rise, while the service sector experienced a decline. According to industry type, the wage increased at a higher rate in the mining and construction industries, while it remained flat in the manufacturing industry. In contrast, the wage increased at a lower rate in the service sector, reflecting weakened resistance to inflation.

In June, the seasonally adjusted unemployment rate in the US rose more than expected to 4.1%, and the broader U4 and U5 unemployment rates reflecting more widespread unemployment situations also rose. However, the labor participation rate increased and the employment rate remained steady, indicating an improvement in the problem of insufficient labor supply and the hope of closing the supply-demand gap.

According to household survey data, the seasonally adjusted unemployment rate in the US rose more than expected to 4.1% in June, and the broader U4 and U5 unemployment rates reflecting more widespread unemployment situations also rose. These results are consistent with the results of business surveys pointing to a cooling job market.

In terms of structure, the labor force participation rate increased and the employment rate remained flat, indicating an improvement in the problem of insufficient labor supply and the hope of closing the supply-demand gap.

In June, non-farm employment growth in the US slowed down, the unemployment rate rose, and the hourly wage growth rate decreased, indicating that the US labor market was cooling down. Therefore, the expected rate cuts have strengthened after the data was released. The US dollar and US bonds fell, while US stocks rose.

In June, non-farm employment growth in the US slowed down, the unemployment rate rose, and the hourly wage growth rate decreased, indicating that the US labor market was cooling down. Therefore, the expected rate cuts have strengthened after the data was released. The US dollar and US bonds fell, while US stocks rose.

Looking at US employment market data since the beginning of the year, the repeated downward revisions in data mean that a weakening of the job market is a fact, but our benchmark judgment is still a steady improvement in the tense situation.

On one hand, the increased job vacancy rate in May means that current labor demand is still strong. On the other hand, the rise in the unemployment rate may be due to labor supply additions but there are structural matching problems, and the gap between supply and demand is still being bridged.

Therefore, this data does not indicate a significant weakening of the US labor market, and does not imply an increase in the need for interest rate cuts. Looking ahead, we still maintain our judgement that the Fed will cut interest rates 0-1 times this year.

For US assets: 1) Economic resilience remains strong, and US stocks may remain resilient; 2) Expectations for interest rate cuts are strengthening, and US bond rates and the US dollar may fluctuate downward.

Editor/Jeffy