Event:
The US non farm payrolls increased by 431000 in March, and the unemployment rate was 3.6%, down 0.2% from 3.8% in February. The labor market showed strong performance. The Fed's policy interest rate needs to return to the long-term policy interest rate level as soon as possible, otherwise the labor market may overheat. We expect to raise interest rates to around 2% by the end of this year.
Key points of comments:
The strong performance of the labor market supported the fed to raise interest rates at full speed
Us march non farm data showed that the job market continued to recover. The non-agricultural employment population increased by 431000, the unemployment rate was 3.6%, down 0.2% from 3.8% in February, and the labor participation rate was 62.4%, up 0.1% from the previous month. After the withdrawal of epidemic subsidies, the labor participation rate continued to rise. In terms of industries, the growth of non-agricultural employment in March was broad-based, and only the employment in transportation, warehousing and public utilities decreased. The largest increase came from the leisure and hotel industry, adding 112000 people in March.
The unemployment rate is almost back before the epidemic, and raising interest rates is imminent
The current unemployment rate requires the Fed's interest rate to return to the long-term policy interest rate level as soon as possible, otherwise the labor market may overheat. The last time the unemployment rate fell to 3.6%, the policy interest rate had been raised to 2.4%, which was also the long-term policy interest rate level in the economic expectation summary of the Fed's March meeting.
In the middle of next year, the number of non-agricultural employment may return to the pre epidemic level
The number of non-agricultural employment in March was 1.589 million less than that before the epidemic in February 2020, and about 5.9 million less than the linear trend line before the epidemic. By industry, there is still a gap of nearly 1.6 million jobs in the leisure and hotel industries compared with that before the epidemic. If the average growth rate in recent March is adopted, it will take about 11 months to return to the pre epidemic level.
Hourly salary growth exceeded expectations and working hours increased negatively
This month's wage data is mixed. The average hourly wage increased by 5.6% year-on-year, up 0.5% from 5.1% in February, but the working hours decreased year-on-year. From the perspective of hourly salary by industry, the leisure hotel industry most affected by the epidemic has the largest cumulative increase, reaching 16.5%, but the hourly salary of the leisure hotel industry is low. If the industry structure of non-agricultural employment returns to before the epidemic, the overall average hourly wage will be about 0.5% lower than the current level.
Risk tips
Geopolitical risks exceeded expectations, and the epidemic repeatedly exceeded expectations
