Source: Wind

Recently, $USD (USDindex.FX)$ With the continuous rise of US Treasury yields, the market is highly focused on the US non-farm payroll data for December, which will be announced at 21:30 Beijing time on Friday.

According to economists' predictions, the non-farm employment population in the USA is expected to increase by 0.16 million people in December, which is lower than November's 0.227 million, but slightly higher than the average monthly increase of 0.143 million over the past six months. The unemployment rate is expected to remain at 4.2%, which is still a relatively low level by historical standards.

Despite the attention on the non-farm employment report, some early indicators have signaled a slowdown in job growth. According to data released on Wednesday by the payroll processing company ADP, USA's private sector added 0.122 million jobs in December, below the market expectation of 0.136 million. This data is typically viewed as a forward-looking indicator for the non-farm report, but due to its volatility, economists are cautious about its predictive accuracy.

ADP's chief economist Nela Richardson stated that the labor market decreased to a more moderate growth rate in the last month of 2024, with hiring and wage increases both slowing.

Analysis indicates that ADP data shows the USA labor market gradually weakening in 2024 and continuing until the end of the year. Federal Reserve officials must balance this trend with renewed inflation concerns when deciding on the interest rate cut path for 2025 and beyond.

Despite recent steady overall employment data, there are significant performance disparities among different Industries. Sectors such as Medical Care, Hotels, and Dining continue to maintain strong labor demand, while recruitment in white-collar sectors like Technology, Media, and Finance is noticeably weak. High borrowing costs have led businesses to be more cautious in financial decisions, with some opting for natural attrition and reduced hiring to control costs rather than large-scale layoffs.

There are divergent views among economists regarding the direction of the labor market in 2025. Some analysts believe that following a relaxation of monetary policy, businesses may resume hiring, and the labor market will accelerate again. However, others believe that significant uncertainty remains in the economic outlook, and the job market may further slow down.

Particularly noteworthy is the impact of policy factors. Some policy directions will be important variables influencing the employment market. For example, certain tariff policies, once implemented, could have profound effects on economic growth and the job market. The uncertainty surrounding trade policies may lead some businesses to reduce investment, thereby affecting hiring plans, while tax cuts could provide short-term financial support to businesses, stimulating the job market.

Despite a slowdown in economic growth, large-scale layoffs have not yet occurred. Thomas Barkin, president of the Richmond Federal Reserve Bank, pointed out in a recent speech that businesses have learned lessons from labor shortages after 2020 and remain vigilant against losing key employees. He stated, "Many businesses realize that the era of labor surplus is over, so they do not want to face recruitment difficulties again. While businesses control employee numbers through reduced hiring and natural attrition, they are very cautious regarding layoffs. The current low recruitment and low layoff market remains healthy."

Barkin's viewpoint aligns with the layoff rate data from the Department of Labor, which shows that the layoff rate remains at a historical low. This indicates that businesses are still striving to avoid employee dismissals to prevent facing manpower shortages in the future.

The non-farm employment data released on Friday will also be an important basis for assessing the health of the labor market. However, focusing solely on new job numbers and unemployment rates is not sufficient to comprehensively grasp market conditions. Market participants will particularly pay attention to details such as labor participation rate, average working hours, and wage growth indicators. Changes in the labor participation rate will reflect how many people are re-entering the labor market, while the level of wage growth can provide clues about the intensity of demand in the job market.

Additionally, the market will closely monitor the changing trends in wage growth. Since the beginning of 2024, the pace of wage growth has significantly slowed, indicating that companies are experiencing less pressure to attract and retain employees. If wage growth slows down further, it may suggest that businesses are more pessimistic about the economic outlook, while a rebound in wage growth may indicate greater optimism among businesses about the future.

In the past year, the USA economy added over 2 million jobs. However, despite the overall employment situation appearing optimistic, an increasing number of unemployed individuals are facing difficulties in returning to the workforce.

As of November, there are over 7 million unemployed individuals in the USA who are actively seeking work. Among them, more than 1.6 million unemployed individuals have been job hunting for at least six months, an increase of over 50% compared to the end of 2022. According to the Department of Labor, the average time for job seekers to find employment has now extended to about six months, which is approximately one month longer than during the hiring boom post-pandemic in early 2023.

The 'winter' of the white-collar job market is becoming apparent.

The recruitment fatigue for white-collar positions is particularly significant, especially in high-paying industries such as Technology, Law, and Media. These industries rapidly expanded during the economic reopening post-pandemic, but as market demand weakened, the demand for new employees has been drastically reduced.

Although the unemployment rate remains at a relatively low 4.2%, far below the average level of the decade prior to the pandemic, data shows that the number of job vacancies per unemployed person has decreased from two at the beginning of 2022 to nearly one now. Additionally, strong hiring activity is now concentrated in a few industries such as Medical Care and Hospitality, while hiring activity in the white-collar sector has clearly diminished.

Despite the overall data appearing healthy, the 'surface prosperity' of the labor market hides many underlying problems. According to the Department of Labor, as of the end of December, 1.8 million people continue to receive unemployment benefits, close to the high point post-2020.

Salary growth has also significantly slowed down. Data shows that as of now, the annual salary growth rate in the USA has fallen to 4%, a noticeable drop from 6% during the hiring boom at the start of the pandemic. This indicates that many companies no longer feel the need to attract employees by increasing pay.

Some economists warn that despite the current labor market weakness manifested primarily in reduced hiring rather than large-scale layoffs, once companies decide to cut costs, layoffs could spread rapidly and trigger a sharp rise in the unemployment rate. Citigroup economist Veronica Clark stated, 'If the reason businesses are cutting hiring is to reduce labor costs, then layoffs may just be a matter of time.'

The consumer confidence survey also reflects people's concerns about employment prospects. According to the December survey data from the 'Conference Board,' the proportion of respondents who believe 'there are plenty of job opportunities' has decreased from 57% in mid-2022 to 37%. Household anxiety about income sources may lead to a reduction in consumer spending, which has been one of the key drivers of economic growth in the USA in recent years.

According to data from the job search website Indeed, by the end of last year, the recruitment demand for positions such as Software Development, Data Science, and Marketing had fallen by over 20% compared to pre-pandemic levels. Government data also shows that the recruitment rate in the Information Industry has decreased by 30% compared to before the pandemic, and the recruitment demand in the Financial Industry has fallen by 28%.

In response to the weak labor market and economic growth pressures, the Federal Reserve has cut the benchmark interest rate by a full percentage point since September. However, even so, the inflation rate has still not returned to the Federal Reserve's target level.

If the job market remains weak, companies may further cut costs, and this chain reaction could ultimately threaten overall economic growth. Against this backdrop, the employment report coming this Friday will provide the latest key data for assessing the health of the labor market.

Although the labor market in the USA appears robust in statistical terms, the issues are evident from the experiences of individual job seekers. Weak recruitment demand in the white-collar sector, significant impacts from AI in the Technology industry, and a slowdown in wage growth all indicate uncertainty for the future. Meanwhile, while there is still demand for jobs in the Service industry, these positions are not feasible for many highly educated and experienced job seekers.

As uncertainties in the economic outlook increase, both businesses and individuals will face new challenges. As economist Veronica Clark said, 'Every fragile signal from the market may trigger a broader chain reaction.'

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Editor/Rocky