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Employment slides ‘only’ slowly in the US while unemployment returns to 3.5%

One of lime and the other of sand, as has been happening in recent months with the US employment data from the perspective of the markets. In December, according to the figures published this Friday by the Bureau of Labor Statistics (BLS) of the Department of Labor, 223,000 non-farm payrolls were created compared to the slightly less than 200,000 expected, unemployment fell to the recent minimum of 3.5% and wage earners’ income slowed from 4.8% to 4.6% year-on-year.

Is this what a Federal Reserve fearful that high inflation will drive up wages and feed back into a bigger price boom is looking for? In part, the December report follows this path. Job creation, although strong and slowing down, is far from the abrasive payroll levels seen months ago. Likewise, the average income is finally consolidated below 5%. However, there is still a long way to go before the central bank is satisfied and so the initial celebration on Wall Street, as is the norm, seems a bit hasty.

After the data was released, Wall Street futures were quickly rising around 1%. The other side was an effusive dollar when more Fed tightening is suspected, but lower when the opposite is suspected. In this case, the prospect that the Fed could calm its policies led the ‘green ticket’ to fall more than 0.1% with the euro. For Treasuries , the yield on the 2-year note was rapidly falling from 4.52% to 4.41%. The 10-year bond or T-Note , quickly went from 3.75% to 3.69%. After the opening of Wall Street, the rises died down and the dollar returned to positive. However, the bad data in the services ISM it returned the initial dynamics when investors speculated with a change in the Fed before the deterioration of the economy.

Unpacking the jobs report in more detail, aside from the 223,000 nonfarm payrolls increase in the report’s survey of businesses, the November payrolls number is revised down from 263,000 to 256,000. Though small, this review buttresses the market outlook. The private sector boosted job creation in December, as public employment only increased 3,000 positions. Temporary employees fell for the fifth straight month and analysts like ING’s James Knightley warn they are the first to lose their jobs when a recession hits.

The aforementioned average income per hour increased by 0.3% compared to the previous month and 4.6% compared to December 2021, after a downward revision of the November data. Analysts expected a new year-on-year increase of 5%, with which the final data has also led the market to value the report positively.

The household survey, the other leg of the employment report, shows an unemployment rate that returns to the recent pre-pandemic minimum (2019) and this last summer ( July ) and to the lowest level in the last five decades, at 3, 5% compared to 3.6% of the previous month, data in turn revised from 3.7%. Employment, according to the results of this survey, increased by 717,000 people after falling 66,000 in November. Household survey data is much more volatile than business survey data and therefore data from a single month is not usually given much importance. However, in this case there seems to be some underlying strength.

The downward change in the unemployment rate, in addition to the increase in employees, is also due to the one-tenth rise -to 62.3%- in the famous labor participation rate , which counts Americans who work or who are looking for work. This is a rate that, after the pandemic, has not been able to return to its previous levels (63.4%) and some of the last months have even fallen. That kind of resistance from some Americans to return to the job market fuels the wage pressures that worry the Fed so much.

“The solid rise of 223,000 non-farm payrolls and the decline in unemployment to its lowest level in 50 years in December will do nothing to ease the Federal Reserve’s concerns about the resilience of core services inflation . That said, The smaller increase in average hourly earnings suggests that wage growth is slowing, and we continue to think that the labor market will weaken further this year as the economy enters a recession,” said Andrew Hunter, US analyst at Capital Economics. .

“The December jobs report showed a still healthy labor market, with some easing of wage pressures. However, both job growth and annual earnings growth remain above the pace the Fed considers consistent with the slowing inflation, putting the central bank on track to continue raising interest rates We expect the FOMC to raise the fed funds target range by 25 basis points on February 1 and see risk tilted towards further rate hikes, ” said Nancy Vanden Houten of Oxford Economics.

The labor data released this week again painted a canvas with a very tight labor market and a Fed on its guard. On Wednesday, one of the US employment data that obsesses the Fed, the job vacancies that the BLS publishes each month in its Job Vacancy and Turnover Survey ( JOLTS ) , offered a reading in November incompatible with the easing market. that the central bank seeks to counteract inflationary pressures.

The report showed 10.458 million job offers that month, below the 10.512 million in October (the initial data was 10.334 million), although notably above the 10 million expected by the consensus of economists. The figure once again shows the tension in the market, although it continues to move away from the peak of 11.855 million last February.

Another fundamental piece of information in the report was that relating to resignations, which in November rose by 126,000 to 4.173 million . After two months down. In percentage terms, it has gone from 2.6% to 2.7%. “Resignations are generally voluntary separations initiated by the employee. Therefore, the rate of resignations can serve as a measure of the willingness or ability of workers to leave the job,” the BLS explained in its report. A sharp rise fuels wage hikes that worry the Fed as workers leave for better-paying jobs.

In addition, this Thursday the ADP company’s monthly payroll survey showed a creation of 235,000 jobs in December, well above expectations. To this was added a new weekly data on initial requests for unemployment benefits at minimums (200,000) .


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