Does the non-farm payroll data predict a recession in the distance? Turns out the hurricane was to blame!
Financial Services Association, August 3 (Editor Liu Rui) On Friday EST, an upset US non-farm payrolls report for July triggered a “mountain and tsunami” in US stocks and sparked heated discussions about the extent to which the Federal Reserve might cut interest rates next month.
Judging from the overall data, this report can be called a “explosion everywhere”: the US non-farm payrolls recorded 0.114 million people after the July seasonal adjustment, the smallest increase since April 2024, which is far lower than the expected 0.175 million people. Meanwhile, the US unemployment rate unexpectedly rose to 4.3% in July, a post-pandemic high, while private sector recruitment rate fell to its lowest level in 16 months.
The report on the non-farm payroll market released by the US Bureau of Labor Statistics clearly raised the market's concerns about the actual state of the US economy.
But despite this, judging from some disaggregated data, it is still possible to uncover more of the truth hidden behind the poor employment figures from this report. Among these, there are four details that are worth the market's relief. Understand that this report may not mean that the end of the US economy is imminent.
Was it all because of the hurricane?
At around the early morning of July 8, local time, Hurricane “Beryl” made landfall in Texas in the United States with the intensity of a Category 1 hurricane. This hurricane is the strongest hurricane in the same period in history since it was recorded in 1851, and it is also the world's “wind king” so far in 2024
Although the hurricane began to abate the day after it landed in the US, the effects of the hurricane continued for several days. About 2.7 million households and businesses in the Houston area of the United States lost power for several days. Even ten or so days after the hurricane landed, tens of thousands of Texas users still have not fully recovered their electricity supply.
Although a big footnote was added to the first page of the non-farm payroll report issued by the US Bureau of Labor Statistics, saying that Hurricane Beryl “had no significant impact” on this month's data, many economists disagree.
Actually, you can refute their own claims just by looking at the “number of workers not going to work due to bad weather” as counted by the US Bureau of Labor Statistics itself in its report.
The report shows that in July of this year, there were 0.436 million non-agricultural workers and 0.461 million agricultural workers in the US who did not go to work due to bad weather. This data not only set a record for July, but is more than 10 times the average for July since the Bureau of Labor Statistics began tracking this indicator in 1976.
Furthermore, more than 1 million people are only able to work part-time due to the weather, which also set a record for the highest data for July in history.
Thomas Simons, an American analyst at Jefferies, wrote: “We are not sure that Beryl is not responsible for this weak data.”
A sharp increase in temporary layoffs
Furthermore, among the number of unemployed people counted in July of this year, the number of people who said “unemployment is only a temporary situation” was the highest in the past three years, accounting for more than half of the total number of unemployed people (0.352 million people).
The sharp rise in temporary unemployment is also inextricably linked to Hurricane Beryl.
“We think some of these layoffs may have something to do with Hurricane Beryl,” Nancy Vanden Houten (Nancy Vanden Houten), chief US economist at the Oxford Institute of Economics, wrote in an analytical article.
Economists expect that if this group of temporarily unemployed people remains unemployed for only a few weeks, then most of them are expected to be employed in August or September, which means that employment data for the next two months will improve dramatically.
Construction employment remains active
The number of people employed in the construction industry is usually a leading indicator of economic changes, especially for industries such as residential construction.
In July of this year, employment data in the US construction industry continued to grow at a steady rate: the US construction industry added 0.025 million jobs in July, slightly higher than the average monthly increase of about 0.02 million construction jobs in the five years before the pandemic.
This may indicate a recovery in the US housing occupancy rate, which has been sluggish for several months, and also indicates that the overall economic situation in the US may not be as pessimistic as the overall employment figures suggest.
The employment rate of middle-aged workers is still very high
Economists pay close attention to so-called “middle-aged workers” — workers between the ages of 25 and 54 — because they make up a large portion of the US workforce.
Despite the poor overall employment data for July, the employment rate for this mature population is very strong.
In July of this year, the labor force participation rate among adults rose to 84%, the highest level since 2001.
For middle-aged men, this rate rose to 90%, a new high since the 2007-2009 financial crisis.
For middle-aged women, the ratio is 78.1%, which is the same as the record high set in May of this year.
Judging from the overall data, this report can be called a “explosion everywhere”: the US non-farm payrolls recorded 0.114 million people after the July seasonal adjustment, the smallest increase since April 2024, which is far lower than the expected 0.175 million people. Meanwhile, the US unemployment rate unexpectedly rose to 4.3% in July, a post-pandemic high, while private sector recruitment rate fell to its lowest level in 16 months.
The report on the non-farm payroll market released by the US Bureau of Labor Statistics clearly raised the market's concerns about the actual state of the US economy.
But despite this, judging from some disaggregated data, it is still possible to uncover more of the truth hidden behind the poor employment figures from this report. Among these, there are four details that are worth the market's relief. Understand that this report may not mean that the end of the US economy is imminent.
Was it all because of the hurricane?
At around the early morning of July 8, local time, Hurricane “Beryl” made landfall in Texas in the United States with the intensity of a Category 1 hurricane. This hurricane is the strongest hurricane in the same period in history since it was recorded in 1851, and it is also the world's “wind king” so far in 2024
Although the hurricane began to abate the day after it landed in the US, the effects of the hurricane continued for several days. About 2.7 million households and businesses in the Houston area of the United States lost power for several days. Even ten or so days after the hurricane landed, tens of thousands of Texas users still have not fully recovered their electricity supply.
Although a big footnote was added to the first page of the non-farm payroll report issued by the US Bureau of Labor Statistics, saying that Hurricane Beryl “had no significant impact” on this month's data, many economists disagree.
Actually, you can refute their own claims just by looking at the “number of workers not going to work due to bad weather” as counted by the US Bureau of Labor Statistics itself in its report.
The report shows that in July of this year, there were 0.436 million non-agricultural workers and 0.461 million agricultural workers in the US who did not go to work due to bad weather. This data not only set a record for July, but is more than 10 times the average for July since the Bureau of Labor Statistics began tracking this indicator in 1976.
Furthermore, more than 1 million people are only able to work part-time due to the weather, which also set a record for the highest data for July in history.
Thomas Simons, an American analyst at Jefferies, wrote: “We are not sure that Beryl is not responsible for this weak data.”
A sharp increase in temporary layoffs
Furthermore, among the number of unemployed people counted in July of this year, the number of people who said “unemployment is only a temporary situation” was the highest in the past three years, accounting for more than half of the total number of unemployed people (0.352 million people).
The sharp rise in temporary unemployment is also inextricably linked to Hurricane Beryl.
“We think some of these layoffs may have something to do with Hurricane Beryl,” Nancy Vanden Houten (Nancy Vanden Houten), chief US economist at the Oxford Institute of Economics, wrote in an analytical article.
Economists expect that if this group of temporarily unemployed people remains unemployed for only a few weeks, then most of them are expected to be employed in August or September, which means that employment data for the next two months will improve dramatically.
Construction employment remains active
The number of people employed in the construction industry is usually a leading indicator of economic changes, especially for industries such as residential construction.
In July of this year, employment data in the US construction industry continued to grow at a steady rate: the US construction industry added 0.025 million jobs in July, slightly higher than the average monthly increase of about 0.02 million construction jobs in the five years before the pandemic.
This may indicate a recovery in the US housing occupancy rate, which has been sluggish for several months, and also indicates that the overall economic situation in the US may not be as pessimistic as the overall employment figures suggest.
The employment rate of middle-aged workers is still very high
Economists pay close attention to so-called “middle-aged workers” — workers between the ages of 25 and 54 — because they make up a large portion of the US workforce.
Despite the poor overall employment data for July, the employment rate for this mature population is very strong.
In July of this year, the labor force participation rate among adults rose to 84%, the highest level since 2001.
For middle-aged men, this rate rose to 90%, a new high since the 2007-2009 financial crisis.
For middle-aged women, the ratio is 78.1%, which is the same as the record high set in May of this year.
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