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-- 869.680 Significant downward revision of the number of U.S. non-farm sector employees, why is the market watching silently?
This article uses auto-translation in some sections
The US Department of Labor Bureau of Labor Statistics (BLS) announced on the 21st that the increase in the number of employees over the past year may have been 28% lower than previously reported. This revision, the largest in 15 years, raises concerns that the actual economic situation may be weakening more than expected. While there were suggestions that the Federal Reserve's expected rate cut in September may have been delayed, the market reaction was subdued.
On the 21st, US stock price indices rose across the board, with the S&P 500 index up 0.42%, the Dow up 0.14%, and the US small-cap and chip stock indices up over 1%. US bond yields also continued to decline (bond prices rose), dropping by nearly 11 basis points. $U.S. 2-Year Treasury Notes Yield (US2Y.BD)$dropped close to 11 basis points.
On the 21st, the US Department of Labor Bureau of Labor Statistics announced estimated annual revisions for the 2024 employment statistics, downwardly revising the total number of non-agricultural sector employees in the US for the 12-month period until March 2024 to 0.818 million, a 0.5% decrease.
While signs of a slowdown were already prevalent in the US labor market, the reality reflects a further cooling.
The official revised figures will be published alongside the January 2025 data. The US Department of Labor provides provisional estimates at this time each year, taking into account factors like unemployment insurance claims.
Some analysts point out three main reasons why the market's reaction is so tepid.
① The market had been expecting a significant downward revision in the number of non-farm payroll and had been trading ahead of schedule.
② If the labor market weakens, there is a higher possibility that the Federal Reserve will actively cut interest rates. This serves as a hedge against market concerns about the labor market, resulting in lower volatility in the market.
③ The data released this time covers a statistical period with a time lag from April 2023 to March 2024. However, the market is mainly concerned about the weak employment situation from the second quarter of this year onwards.
② If the labor market weakens, there is a higher possibility that the Federal Reserve will actively cut interest rates. This serves as a hedge against market concerns about the labor market, resulting in lower volatility in the market.
③ The data released this time covers a statistical period with a time lag from April 2023 to March 2024. However, the market is mainly concerned about the weak employment situation from the second quarter of this year onwards.
There is also a possibility of errors in the revised data and the employment data may be influenced by immigration. Therefore, many market participants are showing various reactions to this data. For example, Goldman Sachs believes that the Bureau of Labor Statistics exaggerated this revision by 500,000 people.
Brian Albrecht, Chief Economist at the International Law and Economics Center, stated that it is not surprising that the market is calm.
This is a major revision, but our market has been anticipating this beforehand, with previous estimates ranging from 35 to 1 million people.
As noted by Mr. Albrecht, Goldman Sachs had previously expected the upper limit of downward revisions to reach 1 million dollars.
Eric Wallerstein, Chief Market Strategist at Yardeni Research, agrees with Mr. Albrecht's relatively optimistic view.
The market's muted response tells the story. These revisions were already factored into the market, and significant revisions were also expected. The negative revision in employment statistics simply reduced the monthly employment growth from an increase of 0.241 million people to 0.174 million people, which is close to the average employment growth levels in 2018 and 2019, and the market is not overly concerned about this.
Another reason investors may be ignoring signs of weakness in the labor market is that such weakness may only increase the likelihood of the Federal Reserve carrying out more aggressive rate cuts in the future.
In March 2022, the Federal Reserve raised interest rates from near zero to a range of 5.25% to 5.5% and maintained that level for over a year. However, with weakening inflation, investors have long been pricing in rate cuts.
The significant downward revision in past non-farm payroll numbers announced last night has slightly strengthened this outlook. According to CME Group's FedWatch tool, the probability of a 50-basis-point rate cut in September has increased from 22.5% on Monday to 30.5%.
Furthermore, most experts believe that due to the significant delay in recent employment statistics revisions, the impact on the FRB will likely be minimal.
Bank of America economist Aditya Bhave noted in a report on Wednesday.
The FRB's concerns about the labor market stem from the slowdown in employment growth since the second quarter and deterioration in other indicators. The FRB is unlikely to be deterred by the news that last year's labor market was 'solid rather than strong,' and the change in investor expectations for rate cuts is 'very minimal'.
Additionally, Wallerstein also pointed out that even if the employment statistics worsen, the FRB has the ability to play the role of a crisis-saving hero. In the event of a worsening situation, the FRB has a tendency to ease policy, and the 'FRB put option' still exists today.
moomoo News of Zeber
Source: moomoo, Bloomberg, CME FedWatch
Data as of 2024.08.22
This article uses auto-translation in some sections
Source: moomoo, Bloomberg, CME FedWatch
Data as of 2024.08.22
This article uses auto-translation in some sections
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Trump 2.0 Era: What's the next opportunity in the markets?
▪️Could Trump's crypto policies potentially benefit the crypto market? ▪️Might his tariff policies have a positive effect on Chinese stocks
Michael McCarthy CCO
Jan 3 11:57
Ask a strategist - Trump's first day
Kimihiko : Since it's an illegal immigration relationship
Horiko Kyopital Mr. Horigo
カレー党 : Hmmm, the numbers were clearly strange.
Even though the economy is in recession like June, the unemployment rate has dropped and it's full of decorations.
But that makes the market move, so just invest with it while being wary. The recession was scary.
It was successfully carried out by the August crash, so that's stupid!
ジロ : Stock prices are a basic act.
The August crash too
I feel comfortable saying that the market has already been factored in.
182076928鬼平 : I first heard about it at Moomoo Securities, and they have a great way of thinking, which is very helpful! Everyone is welcome to visit and it will lead to profit. Thank you very much.
Zakiyamax : Undocumented immigrants cannot receive unemployment insurance, so they are not counted in the unemployment rate. However, they are counted in employment, so if this policy continues as is, it will only cause hardship for American citizens.