On October 2, Eastern Time, data released by the U.S. Bureau of Labor Statistics showed that non-farm employment in the United States continued to increase by 661,000 in September, but was lower than market expectations.

On October 2, Eastern Time, data released by the U.S. Bureau of Labor Statistics (BLS) showed that non-farm employment in the United States continued to increase by 661,000 in September, but was lower than market expectations (850,000). The unemployment rate fell slightly from 8.4% to 7.9%.

Figure 1: The U.S. unemployment rate has dropped for five consecutive months

Source: BLS, Macrobond, China Merchants Bank Research Institute

1. Employment recovery continues to slow down

html Non-farm employment data in September was the last employment report before the US presidential election on November 3, and has attracted widespread attention from all parties. On the one hand, the September non-farm data marks that after five consecutive months of repairs, the U.S. job market has recovered half of the jobs lost (22 million) after the outbreak (11.42 million). On the other hand, since July, affected by factors such as the epidemic and the sharp drop in government subsidies, the recovery of the labor market has gradually slowed down. The new increase in September shrank by more than half (55.6%), setting a new low since the economic restart and not meeting market expectations for the first time. Although the ADP "small non-agricultural" data released two days earlier than BLS was slightly better, it showed that only 749,000 new non-agricultural employment in September was added.

2. Repair structure: three major features

htmlIn September, the U.S. employment data showed three major structural features:

1. The service industry is still the main force in repair. In the private sector, the service industry has added a total of 784,000 new jobs. Although it is still the main driver of new non-agricultural employment (119%), the number continues to shrink by more than 20% (21.4%) from the previous value. The manufacturing industry broke the weak trend since July, with the new increase in September doubled month-on-month (93,000), contributing 14% of the new employment. Specifically, the epidemic fell slightly in September, helping the stagnant leisure and hotel industry to return to normal, with the newly added jobs doubled from the previous value of 143,000 to 318,000, narrowing to 2.2 million from the pre-epidemic gap; while other major forces in the early recovery period, such as retail, professional services, education and medical care, saw a significant decline on a month-on-month basis (reduced by 45.5%, 52.7% and 76.5% respectively). Government employees broke the trend of continuous increase since June, with a decrease of 216,000 month-on-month. There are two main reasons: First, due to the deterioration of finance and the slow resumption of schools, the number of education employees in state and local governments has decreased significantly (280,000); second, the temporary employees of about 34,000 National Census (2020 Census) have left their posts after completion.

Figure 2: US service manufacturing PMI continues to be in the expansion range

Source: IHS Markit, Macrobond, China Merchants Bank Research Institute

Figure 3: Leisure hotel employment is still relatively large gap compared to before the epidemic

Source: BLS, Macrobond, China Merchants Bank Research Institute

Second, unemployment continues to change from temporary to permanent. The number of temporary unemployed people in September was 4.6 million, a decrease of 1.5 million from the previous value, contributing 227% of the new non-agricultural employment. The number of permanent unemployment increased by 345,000 to 3.8 million. The "difference between temporary and permanent unemployed people" continues to narrow, which shows that the recovery of employment comes from the return of labor force to the original job after resuming work. On the other hand, it points to the fact that when the epidemic continues to be suppressed, enterprises will adjust their business expectations, causing some temporary suspensions to shift to permanent reduction. This means that the structural deterioration of the employment market continues and the recovery of employment will be longer. Disney recently announced that it would permanently dismiss 28,000 temporary suspensions, and American Airlines and United Airlines also announced that it would lay off 32,000 employees.

Figure 4: The temporary-permanent unemployment gap in the United States continues to narrow

Source: BLS, Macrobond, China Merchants Bank Research Institute

Third, the number of net unemployment has risen again recently. According to Household Survey data, by the length of unemployment, although the number of unemployment in 5-14 weeks and 15-26 weeks decreased significantly month-on-month (400,000 and 1.6 million), the number of unemployment in less than 5 weeks increased for the first time since the resumption of work (271,000). This shows that the overall decline in unemployment in September mainly comes from the reemployment of early unemployed people, while the number of unemployed people in September showed a net increase.

3. Forecast: The labor market repair speed will be difficult to improve in the near future

Looking forward, the repair of the US labor market has entered the second half, but the slope is expected to be slower.

There are three reasons: First, the development of the epidemic has not been completely controlled. After the average daily infection in the United States dropped slightly to around 30,000 in mid-September, it recently returned to above 40,000.This value is twice the infection level before restarting, and there is still a long way to go to control the epidemic.

Second, the next round of financial assistance plans is still difficult to implement. The 2.2 trillion stimulus package re-launched by the Democrats passed the House on Thursday, but is unlikely to pass the Republican-controlled Senate. In addition to the size of the stimulus package, another bipartisan disagreement is the strength of support for state and local governments. Increased spending and reduced income after the epidemic has caused financial difficulties for local governments, and the layoffs in the public education system in September are just the beginning.

Third, the repair space is relatively limited. After five consecutive months of recovery, the unemployment rate has fallen below 8%, and the number of employed people in major industries has also recovered to more than 90% at the beginning of the year. Only the leisure hotel industry still has a significant gap due to the impact of prevention and control measures. In addition, BLS statistics show that about 22.7% of the work is still completed online, and some offline work may have disappeared permanently.

-END-

Author of this issue

Tan Zhuo Director of the Institute of Macroeconomics

zhuotan@cmbchina.com

Tiandi Macroeconomics

andrewtian@cmbchina.com

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