On July 8, a report released by the U.S. Department of Labor showed that non-farm employment growth slowed slightly in June, the unemployment rate remained unchanged, the labor participation rate declined, and the labor market remained strong, and it is expected to strengthen the

The US job market is very resilient, is the economic recession a "ghost story"?

On July 8, a report released by the U.S. Department of Labor showed that non-farm employment growth slowed slightly in June, the unemployment rate remained unchanged, the labor participation rate fell, and the labor market remained strong, and it is expected to strengthen the hawkish attitude of the Federal Reserve.

data shows that US non-farm employment increased by 372,000 in June, far exceeding the expected 268,000 people, and is slightly inferior to 390,000 in May. This is not only the third consecutive time non-agricultural growth exceeded expectations, but also the largest number of exceeded expectations since February this year.

This also means that the market is still worried about an economic recession, but labor demand is still strong. While some companies did announce layoffs in June, so far, layoffs have focused on industries that are sensitive to interest rates. Meanwhile, job openings are still close to an all-time high, and many other businesses still cannot fill them.

Currently, the total number of employed people in the United States is only 524,000 higher than the historical high set in February 2020. , according to the employment growth rate in June, this gap will be smoothed in August.

The data for April and May 2022 were downgraded at the same time. In April, the number of new non-agricultural employment was lowered from 436,000 to 368,000; in May, the number of new non-agricultural employment was lowered from 390,000 to 384,000. After the correction, the total number of new jobs in April and May was 74,000 lower than previously reported.

But surprisingly, while the institutional survey showed that non-farm employment increased by 372,000 in June, the household survey showed that the opposite was the case, with the number of employed people down by 315,000.

01 The professional and commercial services industry led employment growth

6, the non-agricultural new employment data remained strong.

Specifically, the professional and commercial services industry led the growth of non-agricultural employment in June, with 74,000 new people, followed by the leisure and reception industry, with 67,000 new jobs, and the third-ranked health care industry, with 57,000 new jobs.

It is worth noting that the number of employed people in the leisure and reception industry is still 1.3 million lower than in February 2020 (before the outbreak). This shows that as the world emerges from the shadow of the epidemic, the employment situation in the service industry related to the epidemic such as hotels and tourism will continue to improve.

At the same time, the transportation and warehousing industry created 36,000 new jobs and 29,000 new jobs in the manufacturing industry.

In addition, new employment in the construction industry, retail industry, financial activities, and government departments remain basically unchanged.

02 The unemployment rate has recorded 3.6% for four consecutive months

The unemployment rate has recorded 3.6% for four consecutive months, which is in line with market expectations and is close to the lowest level in more than 50 years.

labor force participation rate was 62.2%, slightly lower than expected 62.4% and previous 62.3%, but far higher than the all-time low of 60.2% in April 2020.

It is worth mentioning that the underemployment rate reached 6.7% in June, the lowest level on record.

In terms of salary, the average hourly wage in June increased by 5.1% year-on-year, slightly higher than the expected 5.0%, slightly lower than the previous value of 5.2%; a month-on-month increase of 0.3%, maintaining the same expectations as the previous value.

03

Non-farm wages have increased strongly, can we take a break if we expect a recession?

html Non-farm employment growth slowed slightly in June, labor participation rate declined, but wages increased significantly, highlighting that The US labor market remained strong, eliminating some recent market concerns about the recession .

Wall Street News Previous article mentioned that Nomura Securities and other Wall Street institutions have long pointed out that the US economic recession is "inevitably avoided", and in the fourth quarter of this year, inflation will last longer; this week Wells Fargo directly stated that the United States has fallen into recession, becoming the first investment bank to predict that the United States is recession.

data shows that the United States GDP fell 1.6% in the first quarter, while real-time data from the Atlanta Federal Reserve Bank showed that the United States GDP also showed a similar decline in the second quarter. If the data shows again as a contraction, the United States will indeed fall into a technical recession.

However, the resilience of the employment market is in sharp contrast to the bleak economic outlook. The non-farm payroll report released by on Friday showed that the U.S. non-farm payroll increased by 372,000 after the quarterly adjustment in June, far exceeding the expected value of 268,000, while in May it was 390,000 new people; the unemployment rate remained at 3.6%, in line with expectations; the average hourly wage increased by 5.1% compared with the same period last year, 5.2% last month, and the expected value was 5%.

Biden said in a statement Friday:

Today, we are informed that all jobs lost in our private sector during the pandemic have recovered and jobs have also been added. This is the fastest and most powerful job recovery in U.S. history.

The historic power of our employment market is one of the reasons why our economy is in a unique and favorable position. can deal with a series of global economic challenges brought by global inflation to the Russian-Ukrainian conflict. No country is in a more favorable position than the United States. It can reduce inflation without giving up on the economic achievements we have achieved in the past 18 months.

However, with the continued high inflation and the test of the ability of interest rate hikes in to maintain a strong economy, will still have many problems in the United States to deal with in the future. As Vincent Reinhart, chief economist at Dreyfus and Mellon, said:

I think we still have a way to go to . This report supports total demand, but lacks support for total supply. But nearly 400,000 jobs have been created for four consecutive months, giving people a slightly different feeling about the possibility of a decline in GDP for two consecutive quarters.

It is worth noting that there are still some signs of weakness in in the June non-agricultural report. For example, although the institutional survey showed that non-agricultural employment increased by 372,000 in June, , the household survey showed that the opposite was true, and the number of employment decreased by 315,000. In addition, there was an outflow of 353,000 workers, and there were still about two jobs available for each worker, exacerbating inflation that was severely lagging behind demand throughout the economy.

Pantheon Macroeconomics chief economist Ian Shepherdson said:

Overall, employment data support our view that the claim that the economy is in recession is fictional, and wage numbers indicate that inflationary pressures are easing. The story of the recession has been overvalued by the market, and the Fed may continue to raise interest rates.

Wilmington Trust said in response to the employment report:

The US economy is still expanding, and employment growth is strong enough to temporarily avoid recession, but aggressive rate hikes may lead to a substantial slowdown, We expect the US and global economies to avoid recession in the next 9-12 months, but the risks have risen.

was affected by non-farm data. The Atlanta Fed's second-quarter GDP indicator fell from 1.9% to 1.2% on Friday afternoon. Although it is still in the traditional definition of a recession, according to Atlanta Fed Chairman Bostic, "the core part of the U.S. economy is still very strong."

As for whether the recession is a "ghost story" or "the wolf is coming", perhaps the answer can only be found by paying close attention to employment and inflation reports and various economic indicators.

04 expectation of 75 basis points increase

After the release of the non-farm report, the yield on the 10-year US bond once climbed about 10 basis points to 3.09%, and the yield on the 2-year US bond treasury once soared 13 basis points to 3.14%.

swap price shows that the probability of Federal Reserve officials raising the benchmark rate by 75 basis points in July increased , and traders' expectations for a peak federal funds rate in the first quarter of next year also jumped above 3.6%.

The next market focus will be the June CPI data released next Wednesday. Only when inflation data peaks and slows down can the Federal Reserve slow down.

Federal June FOMC meeting minutes show that the Fed is considering raising interest rates by 75 or 50 basis points in July. It will take time for inflation to fall to 2%, and hikes may lead to a period of slowdown in the economy. If high inflation continues, the Fed will adopt tougher policies.

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Is the economic recession a "ghost story" or "the wolf is coming"?