Although the softening of the US labor market has finally come into view, there is still a long way to go until interest rate cuts

There is a succession of data confirming that the US employment situation is gradually softening. According to the US employment statistics for July announced on 8/4, it is said that the number of people employed in the non-farm sector fell below 200,000 for 2 consecutive months, and the increase in employment almost returned to the level before the COVID-19 pandemic. Prior to the announcement of the US August employment statistics on 9/1, the number of jobs for the JOLTS (Employment Dynamics Survey) announced by the US Department of Labor on 8/29 fell below market expectations (9.5 million people) with 8.827 million in July, and was also revised downward for 6 months, falling below 10 million for 3 consecutive months. While JOLTS has reached a low level since 2021/3, there are still 3 million more cases compared to job seekers, and the job offer ratio (1.5 times) is 1.2 times that of 2019 before the COVID-19 pandemic, and the number of job offers is still at a high level. Also, the number of private sector employees in August ADP announced on 8/29 increased by 177,000, which fell below market expectations (196,000 people), and the increase remained minimal in the last 5 months.

On 8/23, the U.S. Department of Labor revised the number of people employed (preliminary figures) for the year up to 2023/3 downward based on QCEW (quarterly employment/wage surveys). Although the number of people employed in the US increased at a pace of 337,000 people per month over a year, it was revised downward to about 310,000 per month due to a review by the US Department of Labor. There were downward revisions of around 306,000 people for the year combined, but it fell below JPMorgan's advance forecast (500,000 people). QCEW is published every 3 months and covers unemployment insurance premium payment data for states to which all employers are enrolled, and although it is deferred effect data, it is said that more accurate employment data will be reflected. As for the revision of the number of people employed per year in the US, there is also a possibility that further downward revisions will be made when the final figures are announced in February next year. Since the current employment-related data showed softening in the US labor market without exception, it will be strongly perceived as a hint to stop interest rate hikes by the Fed.

In the June S&P Corelogic Case Schiller Index announced by US S&P on 8/29, housing prices across the US (after seasonal adjustments) rose 0.7% from the previous month, and rose for 5 consecutive months. Prior to this, the US June Housing Index announced by the US Federal Housing Finance Agency (FHFA) on 8/27 was up 3.1% from the same month last year (same +2.9% in May). The index has shown a slowdown in growth rate for 15 consecutive months since 2022/2, but the slowing trend has come to an end. Despite the current trend between the US 30-year mortgage interest rate in the 7.2% range and a high level for the first time in 20 years, the fact that US housing prices have not turned into a decline means that the slowing trend in the rent inflation growth rate does not allow optimism. While US mortgage interest rates have risen in one fell swoop along with interest rate hikes by the Fed, loan subscribers with mortgage interest rates of 4% or less account for over 80% of the total, and mortgage subscribers who enjoy interest rate rulings with deposit interest rates are cautious about replacing houses. While the number of used homes sold in the US in July decreased by 17% compared to the same month last year, prices rose 1.9% from the same month last year. It is said that as a result of the exhaustion of second-hand housing inventories, the ratio of new construction sales in the market as a whole rose from 10% to around 30%. Currently, the number of construction starts for American detached houses has begun to increase rapidly, and it looks like the 3 housing manufacturers that Mr. Buffett has incorporated into his portfolio will benefit. The growth rate of rice rents peaked at 8.2% in March this year, and the growth rate slowed to 7.8% in July, but since the rice housing market has recovered again, rent inflation is likely to show strong stickiness. Even if there is no additional interest rate hike at the September meeting, it seems likely that steer to interest rate cuts by the Fed will be a long way off.