On August 7, Eastern Time, data released by the U.S. Bureau of Labor Statistics (BLS) showed that in July, the number of new non-farm jobs in the United States increased by 1.76 million (expected 1.48 million). The unemployment rate fell from 11.1% to 10.2%.
1. Employment repair marginal release slow
html Non-agricultural employment data in July marks the third consecutive month of exceeding expectations in the US employment market after the economic restart. Since May, the cumulative increase of non-farm employment in the United States has been nearly 9.3 million, which has made up for 42% of the number of job losses since the epidemic, but the unemployment rate is still higher than the high point during the subprime mortgage crisis (10%). It should be noted that the number of people applying for unemployment benefits for the first time per week calculated by BLS remains around 6 times the pre-epidemic trend level, indicating that although employment overall rebounds, some regions and industries are still losing blood, and there is a secondary unemployment.Figure 1: The U.S. unemployment rate has dropped for three consecutive months
Source: BLS, Macrobond, China Merchants Bank Research Institute
Although the non-agricultural data was better than expected, it failed to alleviate market concerns about slowing economic recovery. New employment in July was far lower than the June level (4.8 million, a decrease of about 3 million). The main reason was that after the sharp rebound in the epidemic in mid-June, the epidemic prevention measures in many states in the United States were marginally tightened, resulting in a slowdown in the resumption of work and even a reversal: "severely affected areas" such as California and Florida closed bars, restaurants and other service venues again, and employees returning to work were dismissed again.
2. Repair structure: three major features
html US employment data in July showed three major structural features:1. The cold weather in the service industry is the main reason for the slowdown in new employment. In the private sector, the service industry has added a total of 1.42 million new jobs, and although it is still the main source of new non-agricultural employment (80.7%), its scale has shrunk by nearly 70% compared with June. The new manufacturing industry has continued to slow down since May, with less than 40,000 jobs added in July, less than one-tenth of the previous value. The new increase in the service industry is still mainly from industries that were severely impacted by the epidemic in the early stage: 590,000 new additions to leisure hotels, accounting for 40% of the service industry; retail and education and medical care increased by 260,000 and 220,000 respectively. The number of new employees in government departments increased against the trend: the number of employees increased by 300,000 in July, nearly 6 times the previous value, mainly driven by the rebound in the number of employees in public education institutions in local governments (220,000).
Figure 2: Leisure hotel employment is still relatively large compared to before the epidemic
Source: BLS, Macrobond, China Merchants Bank Research Institute
Second, new employment still comes from the decline in temporary unemployment. The number of temporary unemployed people in July was 9.23 million, a decrease of 1.34 million from the previous value, contributing 80% of new jobs, which once again shows that the rapid recovery of employment stems from the return of a large number of laborers to their original jobs after the resumption of work. The number of permanent unemployed people (2.88 million) broke the trend of continued rise after the epidemic, and slightly reduced by 6,000 people from the previous month (an increase of 590,000 in June).
Third, the unemployment rate repair continues to differentiate among different groups. In terms of age group, teenagers aged 16-19 rebounded the fastest, with a decrease of 3.9 pct month-on-month, while adult women rebounded the slowest, with a decrease of only 0.7 pct month-on-month. From an ethnic perspective, the repair of the Asian/Latino population (1.8/1.6pct) is better than that of whites (0.9pct) and Africans (0.8pct). Judging from the education level, groups with low education levels have a faster recovery speed, which has also caused a slight decline in the year-on-year growth rate of hourly wages.
3. Forecast: Repair slows down, momentum remains unchanged
html The sharp rebound of the epidemic in mid-June casts shadow on the US economic recovery, but non-agricultural data in July show that the overall trend of US economic recovery has not changed yet. Looking forward, the US economy will still show a moderate recovery in the third quarter: First, after the number of new infections in the United States hit a new high in late July, it has now dropped significantly to the average daily level of 55,000, and the number of new deaths has also begun to turn around and fall.Figure 3: New confirmed cases in the United States have fallen significantly
Source: WHO, Macrobond, China Merchants Bank Research Institute
Second, from the high-frequency data, the recent economic trend has initially escaped the impact of the rebound of the epidemic: the New York Fed's weekly Economic Index (WEI) has re-entered the upward channel after a brief decline, and the number of new first-time unemployment benefits in the week also began to decline after two consecutive weeks of rebound, setting a new low after the epidemic (1.19 million).
Figure 4: Lead economic indicators regain rebound trend
Source: NY Fed, ECRI, Macrobond, China Merchants Bank Research Institute
Third, the additional unemployment subsidy due at the end of July will prompt the unemployed to actively seek new jobs. Research by the University of Chicago shows that the additional unemployment allowance of $600 per week in the "Caring Act" has made the income of 70% of the unemployed people higher than their original salary, greatly suppressing employment enthusiasm. The Republican recently proposed the Healing Act (HEALS Act) has significantly reduced additional unemployment benefits to $200 per week, but it still needs to reach a consensus with the Democratic Party to pass Congress. There are still major differences between the two parties.
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Author of this issue:
Tan Zhuo Director of the Institute of Macroeconomics
Field Macroeconomics
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