Zhitong Finance and Economics learned that CITIC ** released a research report saying that the number of new non-farm payrolls in the United States in January 2024 exceeded expectations, and education and health care services, professional and business services, and retail were the main contributing industries to the new jobs, while the breadth of new jobs was further expanded. The U.S. job market is cooling at a slower-than-expected pace, so caution and patience are needed. The labor force participation rate remained low this month, which may be one of the reasons for the tight job market. The bank maintained its previous judgment that the Fed cut interest rates for the first time or around the middle of this year, and cut interest rates four times throughout the year for a total of about 100bps, and the current market expectation of interest rate cuts may still have adjustment risks.
The main points of CITIC ** are as follows:
Matters:
The number of new non-farm payrolls in the United States in January 2024 was 3530,000 (expected 18.)50,000, the previous value was 3330,000); The unemployment rate is 37% (expected 3.)8%, the previous value was 37%）；Salaries increased by 4 percent year-on-year5%, up 06% (previous values were 4.)3% and 04%）；The labor force participation rate was 625% (expected 62.)6%, the previous value was 625%）
In January 2024, the number of new non-farm payrolls in the United States exceeded expectations again, with education and health services, professional and business services, and retail as the main contributors to this new job, while the breadth of new jobs further expanded.
The number of new U.S. non-farm payrolls in January was 3530,000 people, higher than the market expectation of 1850,000 and the revised previous value of 3330,000 people. Salary growth was 45%, higher than the previous value of 43%；Month-on-month growth of 06%, higher than the previous value of 04%, the overall salary growth rate is higher than market expectations. The unemployment rate is 37%, lower than market expectations and the same as the previous value. By industry, 280,000, compared with the previous value after the correction of 330,000 people have decreased, of which 110,000, and the manufacturing industry added 230,000 people. The number of new jobs in non-durable goods in the manufacturing sector was 190,000 people, the main contribution to the new employment in the manufacturing industry; Durable goods added 040,000 people, of which the automobile and parts industry contributed 0310,000 people. 2890,000, compared with the previous value of 24There was a further increase of 50,000 people, including 11 new in education and health services20,000, and 7 in professional and business services40,000 people, and 4520,000 people, the three are the main contributors to the new number of people in service production. At the same time, it should be noted that the employment diffusion index was 65 in January6, 64 in December0, 52 in November4. In the past two months, the breadth of new employment industries has increased significantly. Only the mining sector added 0 fewer jobs this month60,000 people; The leisure and hospitality sector, which had previously created more jobs, and the ** sector, saw a convergence in the number of new jobs added this month. In addition, the labor force participation rate rose to 62 in December5%, the same as the previous value, remained low, lower than the expected 626%。
The U.S. job market is cooling at a slower-than-expected pace, so caution and patience are needed.
First, job creations, wage growth, and the unemployment rate all show that the job market is still resilient, which is already showing signs ahead of the release of the January 2024 non-farm payrolls data: initial jobless claims were lower than expected for three of the four weeks in January; Retail sales announced on January 17 were 06%, higher than expected by 04% and the previous value of 03%, strong retail sales demand may also bring a certain boost to retail employment. In addition, this month's non-farm payrolls report has a large upward revision to the data for November and December 2023, from 1730,000 people were revised up to 1820,000 people, December from 2160,000 people revised up to 3330,000 people, showing that the real situation of employment in the United States is not diminished. Again, there was a divergence of large and small non-farm data again this month, with the number of "small non-farm" ADP employment in January at 1070,000 people, lower than expected and the previous value, and the non-farm data diverged again, and we believe that the reference of the "small non-farm" ADP data after the epidemic is relatively limited.
The structural supply-demand gap in the job market and the fact that the labor force participation rate remained low this month may be the reason for the tight labor market.
First, structural factors such as the increase in early retirements and the low female participation rate after the pandemic have made the rebalancing of the labor supply and demand mismatch need to be driven by a slowdown on the demand side. Second, the U.S. job market is characterized by an oversupply of labor in the commodity-producing sector and an undersupply of labor in the service sector, especially in the health care and social assistance, professional business services, leisure and hospitality industries. The lack of full free movement of labor between the two sectors has led to a situation in which the U.S. job market, the goods-producing sector has cooled, but the services sector has remained resilient. Finally, the low labor force participation rate this month may also be one of the reasons why the job market remains tighter than expected. In the future, we still believe that there is a possibility of a non-linear rise in the U.S. unemployment rate in the future, but the downward path of the job vacancy rate has been repeated, resulting in a delay in the arrival of the upward inflection point of the unemployment rate compared with the previous judgment.
We maintain our previous judgment that the Fed will cut interest rates for the first time or around the middle of this year, with four rate cuts for a total of about 100bps throughout the year, and the balance sheet reduction may begin to decelerate after March, and the balance sheet reduction will end in the middle of the year to the third quarter.
In the short term, it is still necessary to be wary of the risk of an upward correction in US Treasury rates and the US dollar index, and the market's previous optimistic expectations have been adjusted after Powell said that a rate cut in March was not the baseline scenario after the Fed's interest rate meeting in January 2024. After the larger-than-expected non-farm payrolls release, the dollar index jumped and U.S. Treasury interest rates rose. Overall, we believe that the current market expectation of a rate cut remains optimistic as the current job market remains resilient. In the process of revising interest rate cut expectations, it is necessary to continue to be vigilant against the risk of US Treasury interest rates and the US dollar index being strong**.
Risk Factors:
The U.S. job market has been more resilient than expected; Follow-up CPI data in the United States exceeded expectations; The U.S. economy entered an early recession.