Main points:
Event: the United States released the latest employment data in February. Among them, 678000 non-agricultural employees were newly added, the unemployment rate was 3.8%, and the labor participation rate was 62.3%, all exceeding market expectations. However, the average hourly salary increased by 5.1% year-on-year, lower than market expectations.
Core conclusions:
\u3000\u30001. The US February non farm data show that the US labor market is rapidly repairing, and all indicators have improved compared with the previous month. Among them, the number of new non-agricultural employment increased to 678000 from 467000 last month, and the number of employment in December 2021 and January 2022 was revised.
The cumulative employment in the two months after the last revision was 92000 higher than the previous report, a significant increase. The unemployment rate fell to 3.8% from 4.0% last month, while the labor participation rate rose slightly to 62.3% from 62.2% last month. Since the second half of last year, the data of new employment, unemployment rate and labor participation rate in the United States have been continuously improved, and almost monthly employment data will be revised to a certain extent, indicating that the current U.S. labor market is quite strong, or has reached the full employment status in the policy objectives of the Federal Reserve, and the necessary conditions for raising interest rates have been met.
\u3000\u30002. Specifically, the new non-agricultural employment in February was mainly driven by leisure and hotel industry, professional and commercial services, medical care and construction industry, accounting for 58.7%, indicating that the contact service industry is rapidly recovering after the relaxation of epidemic control. The indicators of unemployment rate and labor participation rate are also gradually improving, or will soon return to the pre epidemic level. Although the salary growth rate is lower than expected, it may be due to the large increase of low wage jobs, resulting in the distortion of the average salary level. We also need to pay attention to the risk of “wage inflation spiral”.
1) in terms of breakdown, the main industries that added non-agricultural employment in February were: 179000 new jobs in leisure and hotel industry, 95000 new jobs in professional and commercial services, 64000 new jobs in medical care and 60000 new jobs in construction industry. The four projects added a total of 398000 new jobs, accounting for 58.7% of all new non-agricultural employment, which is the main contribution. Others with more new jobs are transportation and storage industry (48000 new) and retail industry (37000 new), while information industry and government employment are relatively less new. From the breakdown, the leisure and hotel industry, which is closely related to the epidemic, began to increase significantly after the relaxation of epidemic prevention and control measures. Other industries with more new jobs also show that the demand side of the U.S. economy is relatively hot, driving the U.S. economy to continue to recover. As the epidemic factors subside, the US labor market may continue to improve and show a strong posture.
2) the unemployment rate gradually decreased and the labor participation rate slowly increased. In February, the unemployment rate further fell to 3.8%, lower than the market expectation of 3.9%, showing a gradual downward trend. Considering the repair speed of the labor market, it may soon reach the pre epidemic level of 3.5%. In terms of labor participation rate, it has reached the level of 62.3%, driving the overall employment rate of the United States to reach the level of 59.9%, and showing a trend of gradual recovery. It may be because the current high wages in the United States have increased people’s willingness to work, but there is still a certain gap compared with the 63.4% participation rate before the epidemic. However, the number of people over 55 years old participating in labor in the United States is slowly picking up, which means that some early retirees may be returning to work, or the overall labor participation rate will slowly rise to the pre epidemic level.
3) although the salary growth is lower than expected, we still need to pay attention to the “wage inflation spiral”. The average hourly salary in February increased by 5.1% year-on-year, which is lower than the market expectation, and the average working hours per week only slightly increased to 34.7 hours from 34.6 hours last month. The “wage inflation spiral” seems to have eased. However, by carefully examining the employment structure and salary structure, we can find that the average salary of the leisure and hotel industry with more new jobs is lower than that of other industries, which lowers the overall salary level, resulting in distortion of the average salary and can not truly reflect the hot degree of the labor market. In fact, wages in the leisure and hotel industries increased by more than 10% year-on-year, exceeding the average. Therefore, the risk of “wage inflation spiral” has not disappeared and still needs to be paid attention to.
\u3000\u30003. The data show that the current US labor market is strong, which provides the necessary conditions for the Federal Reserve to raise interest rates. At the same time, the rise in wages has driven part of the labor force back to the job market, and the tension between supply and demand in the labor market may be alleviated to some extent. We expect the fed to continue monetary tightening at a predetermined pace. Compared with before the epidemic, there is still a gap of less than 2.1 million in the U.S. labor market, but according to the current repair speed of the labor market, it will soon reach the pre epidemic level. Considering the current high inflation level in the United States and the rising commodity prices affected by the geopolitics of Russia and Ukraine, the conditions for monetary tightening of the Federal Reserve have been fully met, and the interest rate hike will be started in March. At the same time, the rise in wages has also led to the recovery of labor participation rate, indicating that the current tension between supply and demand in the U.S. labor market may be alleviated to some extent. At a recent hearing, Fed chairman Powell also said that the Fed’s tightening policy can shrink demand without harming the labor market. In this case, we expect that the Fed’s tightening policy may still be carried out step by step according to the predetermined rhythm, raising interest rates 3-4 times a year, fast before and slow after. After the first interest rate increase, we began to discuss and implement the table reduction.
Risk tips
International tensions triggered higher than expected inflation, and the covid-19 epidemic situation deteriorated significantly.
