Source: CICC The U.S. Department of Labor has just released its non-farm employment report for December: 145,000 new non-farm employment in December, weaker than the market expectations of 160,000. However, we believe that the new employment of 145,000 people is still stable and

Source: CICC

The US Department of Labor has just released the non-farm employment report for December:

45,000 new non-farm employment in December, weaker than the market expectations of 160,000. However, we believe that the new employment of 145,000 people is still stable, so there is no need to worry too much. The specific comments are as follows:

2 new jobs were created in 145,000 less than the market expected 160,000; but we suggest that this data is still relatively stable. After created 256,000 new jobs in November (partially due to the end of the GM strike, it was not surprising that the decline in new jobs in December was not surprising. At the industry level, the number of employment in manufacturing decreased by 12,000 and the number of employment in mining decreased by 9,000, both of which performed poorly, which is basically in line with the situation where these two industries are still weak. Looking forward, we expect the worst time for manufacturing in the United States and the world is over, crude oil drilling platforms are also stabilizing, and employment in these two major industries is also expected to gradually stabilize. Overall, the average monthly employment of 189,000 in the past six months is still considered strong.

unemployment rate fell to 3.50% from 3.54% last month. According to household survey data, 209,000 new labor force was added in December, which was very strong, but at the same time, the number of new jobs was as high as 267,000, which pushed the unemployment rate to 3.50%.

labor participation rate rebounded from 63.21% last month to 63.25%; however, we expect that the labor participation rate will not only be difficult to increase in the future, but may continue to decline. The decline in labor participation rate after the financial crisis was more than 80% caused by two structural factors: retirement (population aging) and disability, while less than 20% were periodic factors. Currently, these 20% of the cyclical factors have been basically repaired. One of the evidence is that the number of people outside the labor pool who are willing and able to work has dropped to the low level before the 2008 financial crisis. Therefore, since 2017, the labor participation rate has continued to fluctuate between 62.7 and 63%. Considering that structural factors such as aging are dragging down stronger and cyclical support is getting weaker, it is very good that the labor participation rate can remain basically flat in 2019, and it is likely to enter a downward trend starting from 2020.

wage growth rate was lower than the market expectations of 3.1%, down from the previous month. When the labor market tension intensified, the year-on-year growth rate of hourly wages fell from 3.4% at the beginning of the year to 2.9% at the end of December, slightly disappointing the market.

2019 full-year employment data may be downgraded during the annual review. Another bad news for is that the full-year employment data may be downgraded according to the U.S. Labor Bureau’s preliminary estimates of 1,2019 review. The final results of the review will be released in the February employment report. Under the background of policy support, the US economy is gradually seeking its bottom. Looking further forward, we expect US demand to gradually stabilize. In 2018, the Federal Reserve raised interest rates four times quickly, and the actual federal funds rate (nominal federal funds rate minus core PCE inflation) rose to above zero in August 2018, and the momentum of the US economic momentum fell rapidly. But then the Federal Reserve corrected the "mistakes" of previous interest rate hikes too fast and excessive. Since July, the total rate cuts totaling 75bps for three consecutive times, and the actual federal funds rate returned to below zero.

Therefore, looking forward, in the context of policy bottoming, we expect the main tone of the US economy to gradually seek bottoming2.

Note 1: https://www.bls.gov/web/empsit/cesprelbmk.htm Note 2: See our overseas macro report "Policy Bottom Support, Economy Bottom Search | 2020 Global Economic Outlook" published on November 4, 2019.