Is the recession coming? United States non-farm payrolls added 114,000 jobs in July, significantly less than expected, and the unemployment rate rose to 4.3%, the highest in nearly three years

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.

Data released by the United States Bureau of Labor Statistics on Friday showed:

United States nonfarm payrolls rose 114,000 in July, the lowest since December 2020, far below expectations of 175,000 and down sharply from 206,000 (revised down to 179,000).

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

Wage inflation continued to cool, with hourly earnings rising 0.2% month-on-month in July, slightly below expectations and the previous reading of 0.3%, and rising 3.6% year-on-year, missing expectations of 3.7% and the previous reading of 3.9%.

The labor force participation rate was 62.7% in July, up 0.1 percentage points from 62.6% in the previous month and higher than expected to be flat.

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 is trading lower in the short term.

Traders have raised their bets on rate cuts in 2024 and now expect a 111 basis point cut, betting that the Federal Reserve will cut rates by 50 basis points in September.

Bellwether Wealth 首席投资官Clark Bellin表示：

While the labor market has remained remarkably resilient over the course of the past two years of rate hikes, the Fed must continue to cut rates in September as expected to prevent a further slowdown in the labor market.

The unemployment rate triggers the Sam rule, and the recession alarm sounds

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.

There are also analysts who do not believe that the United States economy has entered a recession, LPL Financial Chief Economist Jeffrey Roach said:

The latest situation in the labor market is in line with the economic slowdown, but does not necessarily mean a recession. However, early warning signs indicate further economic weakness.

Roach pointed to a relatively positive phenomenon, with the number of people working part-time for economic reasons jumping to 4.57 million in July, an increase of 346,000 from the previous month and the highest level since June 2021.

Another measure of the unemployment rate – which covers "frustrated workers" who are no longer actively looking for work and those who can only find part-time work for economic reasons – rose 0.4 percentage points to 7.8 percent, the highest level since October 2021.

At the same time, there was an increase in the number of long-term unemployed, that is, those who have been unemployed for more than 27 weeks, reaching a total of 1.54 million, the highest recorded since February 2022.

Despite some concerns about the state of economic growth, Fed Chair Jerome Powell on Wednesday expressed confidence in a "soft landing" for the economy and said that persistent downward inflation has boosted confidence that interest rates can be cut soon.

It is important to note here that the unemployment rate unexpectedly rose by 0.2 percentage points, mainly due to an increase of 249,000 temporary layoffs following Hurricane Beryl. The analysis expects the unemployment rate to fall back to about 4.1% in August.

Household and institutional surveys narrow

The data on new jobs in the previous months were 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.

The number of new jobs in the household survey was half that of the agency survey, at 67,000, but the gap between the two surveys narrowed significantly from previous months.

This means that the number of employed people surveyed by agencies may have finally peaked, compared to the household survey data that has not changed over the past year.

Employment in the information industry decreased by 20,000 people, and the medical and construction industries increased

Looking at the employment structure of the non-farm payrolls report, employment in healthcare, construction, transportation and warehousing continued to trend upward in July, while the information sector declined.

55,000 new jobs were created in the health care sector and 25,000 more jobs were added in the construction sector.

the transportation and warehousing industry increased by 14,000 people, and the number of social assistance people increased by 9,000;

Employment in the information industry fell by 20,000, but there was little change from the same period last year.

Government employment also did not change dramatically, with an increase of 17,000. Government employment growth has slowed in recent months, following a sharp increase in employment in the first quarters of 2023 and 2024.

In addition, employment in other major sectors such as mining, manufacturing, retail, finance, business services, leisure and others was little changed.

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