Will the Fed keep rates low as new jobs cool?
Central banks and governments around the world hit the panic button when the coronavirus erupted and they made the biggest spending ever. Billions of dollars and euros have been spent during this time, but it has been going on for some time now, with national debt rising in all countries, while people seem more used to the coronavirus now, so life has gone on. standardized, despite the new variants.
Central banks are under pressure to slow down the stimulus and start raising interest rates. The Reserve Bank of New Zealand did so, raising rates 0.25% at the last meeting and comments from hawkish Fed members increased, so the odds of the Fed shutting down soon. Quantitative easing program and rates of increase have also increased, especially with inflation above 5% and new jobs close to $ 1 million per month.
But, recent jobs reports have largely fallen short of expectations, showing a cooling off. Jerome Powell already wasn’t too keen on hiking rates, so these recent ones should put him off even more. This is why the USD fell on Friday following the NFP jobs report which is displayed below, although the decline has halted for some time, so for now we are right in the middle. There is more data to come before the next FOMC meeting. But, if the data gets colder, the doves will be louder while the hawks calm down, which will weigh on the USD.
Report on the use of ADP in the United States
- ADP Jobs August 374K vs. 640K expected
- The previous month has been revised to plus 326K instead of + 330K. Recall from last month, the BLS estimate for job gains stood at 943K. Since the pandemic, employment data for ADP and BLS have diverged
- Small businesses registered a gain of 86K
- Mid-sized companies recorded a gain of 149K
- Large companies recorded a gain of 138K
- Goods-producing sector grows 45K
- Service delivery sector plus 329K
Looking at specific industries, goods producing industries saw:
- Natural resources plus 9K
- Building + 30K
- Manufacturing plus 6K
Service-producing industries recorded employment gains of:
- Trade, transport and public services, +18 K
- Information, unchanged
- Financial activity +13 K
- Professional company +19 K
- Education and health, + 59K
- Leisure and hospitality, + 201K
- Other services, +19 K
ADP comments and Moody’s analysis.
Nela Richardson, chief economist of ADP, said:
- “Our data, which represents all workers on a company’s payroll, showed a slowdown in the labor market recovery. We have seen a drop in new hires, after significant employment growth since the first half of the year. Despite the slowdown, job gains are approaching 4 million this year, but still 7 million jobs below pre-COVID-19 levels. Service providers continue to lead the growth, although the Delta variant creates uncertainty for this industry. Job creation in all sizes of business has grown at the same pace, with small businesses lagging behind a little more than usual. “
Mark Zandi, Chief Economist at Moody’s Analytics, said:
- “The Delta variant of COVID-19 appears to have started the job market recovery. Job growth remains strong, but far from the pace of recent months. Job growth remains inextricably linked to the trajectory of the pandemic. “
US non-farm payroll data as of August 2021
- Non-agricultural wage bill in August + 235K vs + 750K expected
- Before was 943K (revised to 1053K)
- Net overhaul over two months + 134K
- Unemployment rate 5.2% vs. 5.2% expected
- Previous unemployment rate 5.4%
- Participation rate 61.7% vs. 61.6% expected (vs. 62.8% before the pandemic)
- Previous participation rate 61.7%
- Underemployment rate 8.8% vs. 9.5% expected (9.2% previously)
- Average hourly wage + 0.6% m / m vs + 0.3% expected
- Average hourly wage + 4.3% y / y vs + 4.0% expected
- Average weekly hours 34.7 vs 34.8 expected
- Evolution of private payroll + 243K vs + 665K expected
- Evolution of the manufacturing payroll K vs + 25K expected
- Long-term unemployed at 3.2 million against 3.4 million previously
- The employment-to-population ratio, at 58.5% against 58.5% previously (61% before the pandemic)
- Full report
The household survey was decent, with unemployment continuing to drop, but the establishment survey was poor, with “leisure and hospitality” adding no jobs, a sign that re-hires linked to the pandemic have stagnated in the past. during the month. In particular, there were 42,000 job losses in food services and drinking places.
The higher wage figures reflect fewer low-wage workers in industries affected by the pandemic, but I wouldn’t take that as a positive sign. Part-time jobs for economic reasons remained unchanged at 4.5 million.
This reduces the risk of a taper announcement in September, and may even eliminate the risk of a taper clue. What’s important to note is that the Fed will only get one jobs report before the November FOMC. This meeting is on the 2nd, and the October jobs report is not due until the 5th. So this greatly reduces the chances of a reduction announcement in November.