Is the recession coming? United States non-farm payrolls fell sharply short of expectations in July, with the unemployment rate rising to 4.3%, a three-year high

Wall Street Sights

2024-08-02 21:14Posted on the official account of Shanghai Wall Street

The United States non-farm payrolls report for July surprised markets, with job creation hitting its lowest record in three-and-a-half years, the unemployment rate rising to its highest level in nearly three years, and triggering the Sam rule, a recession indicator with 100% accuracy. Panic has accelerated as traders have begun to bet on the possibility of a 50 basis point rate cut in September, predicting a rate cut of more than 110 basis points this year.

United States nonfarm payrolls rose by 114,000 in July, the lowest since December 2020, far below expectations of 175,000 and a sharp decline from the previous value of 206,000 (revised down to 179,000), according to data released by the United States Bureau of Labor Statistics on Friday.

The United States unemployment rate rose 0.2 percentage points from the previous month to 4.3% in July, the highest since October 2021 and beat expectations of 4.1%.

Note that the United States unemployment rate has surged 0.6% from its year-to-date low, triggering the Sam rule based on the unemployment rate to predict a recession, and the United States economy has begun to enter a recession, according to the well-known financial blog Zerohedge.

According to the Sam Rule, if the unemployment rate (based on a three-month moving average) rises by 0.5 percentage points from last year's low, then a recession has begun. This indicator has had a 100% forecast accuracy rate since 1970.

At the same time, wage inflation continues to cool. The non-farm payrolls report showed that hourly earnings rose 0.2% month-on-month in July, slightly below expectations and the previous value of 0.3%, and rose 3.6% year-on-year, less than the expected 3.7% and the previous value of 3.9%.

After the release of the data, the futures of the three major U.S. stock indexes fell in the short term. Nasdaq futures fell more than 2%, S&P 500 futures fell 1.6%, and Dow futures fell 1.2%; United States Treasury yields fell rapidly, with the yield on the 10-year United States Treasury falling 19 basis points to a year-to-date low of 3.79%; The U.S. dollar index was lower in the short term, falling 0.65% on the day.

Traders have raised their bets on a rate cut in 2024 and are now expected to be 111 basis points, with traders betting that the Federal Reserve will cut rates by 50 basis points in September.

As expected, the number of new jobs in the previous months was revised downward again, by 2000 in May and 27,000 in June, for a total of 29,000 in two months. Data for five of the last six months are now revised downward.

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